its adherents are some of the harshest critics of Keynesian interventions. The greater of the two economic systems used has got to be Keynesian. The exact cause of business cycles is one of the biggest problems in economics. There are several explanations. The current Keynesian models rely on what is referred to as "sticky wages" (or "sticky prices") to explain why the cycles occurs. Under these models, wages or prices fail to reach their market clearing level. The Austrian School explanation is that all business cycles are due to government intervention in the economy. In particular, government efforts to manipulate the interest rate causes a boom and bust cycle because people over-invest ("malinvestment") when interest rates are low and when interest rates are Raised to stave off the inevitable inflation, a bust is caused due to the mismatching of consumer and business goods. There are six depressions in American history that is thought to be the worst since detailed records of economic data started To be kept (around 1867), 1873-79, 1893-97 (actually two contractions separated by an incomplete expansion), 1907-08, 1920-21, 1929-33, and 1937-38. Although depressions vary on length and severity, the similarities are so profound that Nobel Laureate Robert Lucas has stated; "business cycles are all alike." Since it's been about 60 years since we've had a depression, One might think that the economy is being managed better than it used to be. It's not clear why the economy is being managed better. The Federal Reserve Board was created in 1913 and yet half of the worst depressions happened after its creation. A Better candidate might be the adoption of Keynesian management techniques, which were not fully implemented until after the Last severe contraction in 1937. But there are some indicators that that is not responsible either. Detailed studies have been done to compare post-war business cycles with prior ones. At least one indicates t...
