The New book Macroeconomics Has No Clothes is out — Get your copy →

Should Governments Smooth Business Cycles?

In short

If the economic cycles are a healthy sign, why even attempt to smooth out the cycles. By doing so, you would hinder technological progress. It is wrong to flatten them all out without discerning the underlying reasons.

Smoothing Cycles Hinders the Technological Progress Keynesians attempt to smooth out economic cycles, which they do not appreciate. Their theory of economic cycles is built ironically on a basis that lacks understanding of the subject. It should be named as a counter-cyclical theory without a single chapter of economic cycles. We must ask ourselves: if economic cycles are caused by technological progress, should we also smooth out such cycles? If we did, we would hinder technological progress. Is that desirable? Chapter 4 of the book, Marcoeconomics Has No Clothes, will show that cyclical fluctuations are a sign of a healthy and vibrant economy. We need to at least differentiate the causes of cyclical fluctuations. It is wrong to flatten them all out without discerning the underlying reasons. Keynes himself attributed economic fluctuations to the animal spirits of entrepreneurs. However, government officials possess animal spirits as well. Why is it that the animal spirits of entrepreneurs lead to economic fluctuations while the same spirits of government officials smooth out economic cycles? That is absurd.

Reviewed 27-10-2026 16:32