Freedom pride, which I have mentioned here before, published an article on their VK page “How Not to Bring Back 2008”, where they briefly outline the Austrian theory of the business cycle (thanks!), and then move on to explain the real business cycle theory, which in the author’s presentation essentially claims that no cycles exist, only random shocks—basically, sometimes a black swan just craps on your business from the sky. That’s all there is to it, and there’s no need to ponder where these swans come from; it doesn’t matter.

Of course, such an approach seems insufficiently satisfying for something claiming the status of a theory. The Austrian approach clearly identifies the cause of cycles: credit expansion by banks operating under fractional reserves and the regulation of the discount rate by central banks. Without specifying the causes, it becomes something like stating a death was caused by the flu, while the deceased was over a hundred years old and their body was completely worn out. Had they not died of the flu today, they would have died of a heart attack tomorrow. In other words, the specific black swan is less important than the systemic factor of old age.

However, within the framework of the article, it is indeed not so important why cycles happen; it focuses not on how to get rid of credit expansion, but on what allows the economy of one country or another to weather crises more easily. Accumulated statistics by country show that countries with free economies endure crises much more easily, even though it would seem that the most terrifying bubbles inflate in the financial markets there, and they should be worse off. But that’s not the case; the market levels the structure of supply and demand much faster than any dirigiste government measures.

That is to say, even if one considers either business cycles or simply random shocks to be inevitable, a country can quite possibly minimize their consequences simply by having a liberal economy. It is for the sake of this optimistic conclusion that I recommend this somewhat controversial article.