In the 1960s, the heyday of Keynesian economics, economists spoke optimistically of an end to the dreaded business cycle. Then came the stagflationary jolt of the 1970s, the credit crunch and banking crisis of the 1980s, and Japan's depression of the 1990s. In short, the business cycle seems alive and kicking. The graph is printed below.
Expansions are longer and slumps are milder.
Moreover, the trend appears to be improving, and some economists are once again predicting that recessions will disappear altogether. All these policy changes have created an environment that errs on the side of inflation, rather than deflation. And an inflation-biased economy is likely to give you more boom than bust over the long term. But there is no free lunch. Interestingly, greater stability in the business cycle has also coincided with less growth in the postwar U.S. economy.