“OLD-FASHIONED BOOM AND BUST”.

“OLD-FASHIONED BOOM-AND-BUST”. Robert Samuelson had a recent Washington Post article (link via Realclearpolitics) about the explanations that have been given for the current economic crisis. He is still of the view that it resulted from an “old-fashioned boom and bust” and not merely the housing market collapse. An old-fashioned bust results from the excesses of an old-fashioned boom and is needed to correct those excesses. Samuelson says that he is much in the minority among current economists. He cites two reviews of the literature in a professional economics journal. Out of 16 scholarly papers and 21 books about the current crisis, none gives an old-fashioned long boom and bust explanation. As I posted here, fifty years ago, there were many publications and entire courses about business cycles, and the notion that economic policy might be able to prevent busts from occurring was a novel minority view. Samuelson thinks that economists today are reluctant to accept the idea that there are limits to the ability to manage the economy. Kids, it makes a big difference if you view the economy as normally having booms and busts or if you view it as being capable of going long periods without a bust if properly managed.