From: ekp@mcnc.org (Edward Pavelchek)
Newsgroups: misc.headlines,talk.politics.misc,alt.activism,sci.econ
Subject: Re: Boom Boom Boom Boom : )
Date: 28 Aug 92 17:14:17 GMT
Article-I.D.: mcnc.1992Aug28.171417.13836
Distribution: usa
Organization: Good place for a disclaimer

In article <thompson.714931542@daphne.socsci.umn.edu> thompson@atlas.socsci.umn.edu writes:
>
>_Why_ business cycles happen is perhaps the biggest open question in
>economics today, and has been since at least the turn of the century.
>No professional economist of whom I am aware considers the question of
>causality for business cycles to be a closed topic.  This is an area
>of great controversy and very active research within the profession,
>so it should come as no surprise that there is so much controversy and
>confusion about it among the general population.  The available data
>are inconclusive enough to support many opposing viewpoints.

I'm sure economists have a much stricter definition of 'why' than
the rest of us.  Do you mean that efforts to predict business cycles
are hopeless, or is there controversy over a basic viewpoint like 
business cycles are caused by the improper weighting of temporal
business patterns in the human brain?  From psychology, there seems to
be a very good fundamental explanation for business cycles, eg a bank
officer whose last 3 yrs of loans have performed flawlessly and whose
coffers are flush with money *will* lower his lending standards, since
his recent experience tells him it is safe to do so. Understandably, we
are a hell of a long way from being able to predict the
next business cycle from such an approach.

>Food for another thread: I have said here and in another post that the
>evidence for/against various theories of the business cycle is fairly
>weak.  However, I remember once seeing a graph that suggested that the
>amplitude of the cycles has on average been much lower since the end
>of WW II than before.  The speaker who presented this graph
>interpreted it as evidence that economists and policy makers had in
>fact learned something about business cycles since the turn of the
>century.  Comments?

Yes, I think that it's true.  Was there any general theory of business
cycles before Keynes? But I believe that size has been a larger factor than
knowledge.  Doing economics by almanac, I'll contribute government
purchases as % of GNP.

	  Federal  Total
1929     1.3%     8.5%
1938     6.5     15.5
1955    11.1     18.8
1965     9.7     20.1

Prior to WWI, a lot of our economy was probably
off the books, so any numbers you have for those times may overemphasize
the government fraction.  Government spending is not immune to 
to recession, but Federal spending doesn't track it very closely.
Most states cannot run deficits, so must respond within a year.  Since
the 30's the Federal budget has grown tremendously and is a
stabilizing influence.  When the entire Federal budget was less than 1%
of GNP, mammoth deficit spending would have been nearly unnoticeable.
The obvious task is to compare spending levels and recession depths
in Europe.  Any data?
-- 
Ed Pavelchek   ekp@mcnc.org
But I make a profit of 3 1/4 cents an egg by selling them for 4 1/4
cents an egg to the people in Malta I buy them from for 7 cents an egg.
Of course, *I* don't make the profit.          Joseph Heller, Catcha 22
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