By Frank Shostak
For a while, some economists tried to claim that business cycles are the result of significant changes in technology. The Austrians have a better explanation.
Even my normie grad school buddies found this macro theory particularly vacuous.
Mmmm... I obviously don't buy that recessions are caused by negative technology shocks, but it's reasonable to think that a technology shock can trigger a boom, and a recession follows from overinvestment
It wasn't that the idea was utterly implausible but the technical theory was silly.
My recollection is that the thing they called a technology shock wasn't (it was just a residual) and the thing they called a recession wasn't (it was just a deviation from the long term growth trend).
labeling the unexplained part and calling it a theory is a time tested academic tradition, like dark matter in physics
I'm well aware. I work with people who devote a lot of time to studying and publishing about a particular residual, seemingly without realizing that's what they're doing.
Always worth questioning simple explanations for something as complex as business cycles.
Technology can change growth, but it doesn't explain every boom and bust.
Technology changes productivity. The financial system often determines how smoothly that transition happens.
The AI boom is a good real world case study for this debate.