Business Cycles: Boom and Bust

We are all somewhat familiar with economic expansion and recession. And pretty much everyone has heard of The Great Depression. What are recessions and depressions? How do we describe the business cycles that produce them? Let's define this term, talk about some major indicators and drivers of business cycles, and then look at what prominent economists Friedrich Hayek and John Maynard Keynes had to say about them.

Check out "Is This Wi-Fi Organic?", my book on disarming pseudoscience!

[jchambers]

I have a BSBA in marketing with minors in computer science and psychology. Above and beyond that I have also taken extra computer science and math classes. It's been over 7 years, so technically, colleges would not accept those classes anymore. I just wanted to say how much I thoroughly enjoyed this video and I will start watching more of Professor Dave's videos just to refresh my memory. Thank you, Professor Dave!

[glennpearson]

I guess the terms "bull" and "bear" apply to markets, not economies, but I often think of a "bull" economy when things are growing and expanding. Likewise, a "bear" economy is one that is sinking or contracting.

[mikelewis]

Props for including Hayek in your analysis at least. Since this was a very high level overview that's probably good enough for now. If anyone wants to learn more, though, you need to read Mises.

[larrykent]

Economics are a great subject to understand as a whole, thanks Dave for this brief overview.

[Aran_Zar]

In practice evidence shows Hayek’s solution is way better than Keynes. But a politician will never admit it because their power is reduced.

[lucassabbione]

Stagflation was a recognized phenomenon in Argentina during the 50'. Just a footnote

[ggsipaper]

Actually, some of your "leading" indicators are incorrect. GDP is actually a measurement of the economy and is more appropriately categorized as a coincidental indicator. Interest rates are classified as a lagging indicator.

[abdelrahmangamalmahdy]

Hayek's model is in support of the poor people and saving limited earth resources. Keynes's view is to over-consume limited earth resources in order to pump money and resources to business owners which just makes rich people richer in the cost of future generations!

[mikelewis]

In your comparative analysis between Keyenes and Hayek, you ought to have acknowledged that Hayek has been proven right numerous times as the booms created by Keyenesian policies have all inevitably burst into deeper recessions than existed before. Don't forget that the Great Depression itself was caused by the Fed. But you don't have to go back that far. The housing crisis of 2008 had a number of contributing factors, but the glue that held them all together was easy credit from the Fed. And even today's recession with all the inflation we've been dealing with was caused by all that money the Fed printed in 2020 to support the pandemic lockdowns. You could chalk that up to "external shock", but it really wasn't an external shock so much as it was how the Fed responded to the external shock. The economy might have suffered somewhat if we hadn't locked down - nobody really knows - but it's unlikely we'd be dealing with all these ripple effects from inflation etc this long after if we hadn't.

The Mises Institute has a lot of really good resources including books by Murray Rothbard about how central banking drove all the worse recessions of the 19th century

[Homerow]

Growth seems to be a necessary component in economies, but I wonder if there are any new theories or examples of economy setups that reward stability over time instead of pushing for endless growth.

I'm not sure that would even be defined as an "economy" anymore, though. Maybe that'd be it's own, separate section of study.

Great video, made me think!

[mikelewis]

"Business cycles are very difficult to predict"
*Ron Paul has entered the chat*

[alixvillat]

Like how clear you speak 👌 thanks professor 🙏

[nektu]

This is a subject I find interesting but don't know much about. Does anyone have any good suggestions for further reading?

[matthewcerini]

I may be oversimplifying, but if growth = quantity and stability = quality then it comes down to what mix of growth and stability society wants as a whole. That's why we vote in the elections and with our wallets.

[willbyrob]

Professor Dave, can you do a video on Elwood’s Dog Meat farm?

[ephre]

This is the Dave the flat earth needs right now.

[Sarahbryson]

I watched you flat earth videos, but I’m watching this now as well

[jon]

The first great depression was I believe in 1873

[austinhernandez]

Why grow forever? Why not just be sustainable? That's a problem with capitalism.

[themadman]

Ah yes, the cycles of capitalism, unsustainable growth followed by a recession when prices grow too high for our meager wages to cover costs. While the working people suffer from such cycles those that propagate it suffer nothing but a reduction in profits. You gotta love it I suppose.