The Business Cycle: Theories and Evidence.

• Author: Wood, J. Stuart

One might churlishly observe the omission of the word "Some" preceding the word "Theories." This book consists of the texts of presentations (sometimes with substantial changes between presentation and publication) and commentaries made at the Sixteenth Annual Economic Policy Conference of the Federal Reserve Bank of St. Louis in October, 1991. The framework is that of Monetarist, Keynesian, "New-Keynesian," and "Real Business Cycle" theories, based on aggregate economic theories. All of the papers and comments based in the naive ignorance of Hayek's Scientism and the Study of Society, "The Pretense of Knowledge," and his works on business cycles. The Austrian framework, and other theories linking monetary expansion and malinvestment, are completely ignored.

The Bank's President Thomas C. Melzer set the tone of the conference: ignorance and controversy regarding the nature of business cycles and the forces that drive them cause policy actions taken by government to have unanticipated and undesired effects. An economist more "maverick" (in Mr. Melzer's word) or "crackpot" (in Kenneth Arrow's word) would note that Mises and Hayek, two writers on the business cycle whose contributions are completely ignored in this volume, would not be surprised at all by such contrary policy effects. All of our authors are amazed that empirical studies of the macro-economic variables which are modeled cast no light on the causes of business cycles. They are secure in their ignorance of what Mises, Hayek, and Buchanan have taught us about unintended consequences of government policy.

An uncredited Preface does a good job in a few pages of summarizing the main points of the various presentations.

The keynote chapter is "What is a Business Cycle?" by Victor Zarnowitz, who presents in a historical framework his thoughts about business cycles, and attempts to reach a single definition of the cycle by studying empirical data relating to cycles. Zarnowitz also compares international business cycles to American cycles, providing a very useful context. Because of its comprehensive consideration of the analysis of empirical data regarding business cycles, this is a very informative paper, providing a wealth of description of the symptoms of business cycles. Zarnowitz discusses cyclical variables, "exogenous" variables, some of the effects of money, shocks, leads and lags, and co-movements and amplitudes. But in a bibliography spanning six pages, he gives no mention to...