I was reading an interview with Milton Friedman about his take on the misesian ABCT, where he makes a few assumptions that I’m unsure are actually accurate.
(Here’s the link to the whole interview as a pdf: )
Here’s the parts that I’m unsure of:
The von Mises theory of the cycle is that the ‘cause’—they would use the word
cause—the cause of the depression is the prior expansion. That means, it would seem to me, that
if you have a big expansion, you are going to have a big depression. You have a little expansion,
you’ll have a little recession.
I’m not sure that the ABCT makes any concrete quantitative statements about the size of the recession in any way that is not “ceteris paribus”.
So I went and I looked at the relationship between the amplitude of expansions and the amplitude of the succeeding recessions. There’s zero correlation. On the other hand, there’s a very high correlation between the amplitude of a recession and the amplitude of the succeeding expansion. That’s utterly inconsistent with the von Mises theory.
Does the Misesian ABCT say anything in regards to booms/expansions that occur after recessions?