The business cycle · Course 14 of 15 · Stage 5
Every account of the cycle
Five rival explanations of the same phenomena, each described as its own proponents describe it, then placed beside the Austrian account. No winner is declared.
A theory is only as interesting as the alternatives it beat, and most presentations of a heterodox account never name them. This course does the opposite: it sets out five mainstream and near-mainstream explanations of the same phenomena, each in the terms its own proponents use, before saying where it differs from the account in this track.
Eight lessons. The first lists the facts any theory has to fit, written down before any theory is given, so that the later lessons can be measured against something. Then Keynes on the collapse of the marginal efficiency of capital, the monetarist account of money and its lags, real business cycle theory and the claim that fluctuation is an efficient response to real change, the New Keynesian framework that most central banks actually use, and Minsky's financial instability hypothesis.
The seventh is about method rather than mechanism: what the historians of crises do instead of building a model, and what that approach can support.
The eighth is the payoff of the whole track. Credit growth predicts financial crises, measured across fourteen countries and more than a century, replicated and published in mainstream journals. It is the single strongest piece of evidence that credit conditions matter. It is also not a vindication of any one theory, and the lesson says so.
No verdict is offered at the end. Every account here has explanatory successes and open problems, and a reader who finishes the course should be able to state both for each of them.
Nothing here is a policy position, a forecast, or a view about any security. ValueScreener is a research tool, and this academy is free to read without an account.
A theory, not a measurement
Every account of the cycle is 8 lessons on the argument about the theory: what its critics say, what it answers and what it has not answered. A theory you have tested against its objections is still not a measurement, and no filing of yours has been read on these pages.
Related
- The case against the theory is the course before this one: the objections to the account this track has been teaching.
- Credit growth predicts crises is the lesson to read last, and the one that carries the strongest evidence in the whole track.
See our methodology for how the product reads a filing and what it refuses to compute.