The Fraser Institute quietly released this past summer a video entitled “Essential Hayek: Economic Booms and Busts.” The conservative think-tank explains just what the boom-bust cycle is.
Economist Don Boudreaux briefly dives into the idea that politicians believe they can create demand for a product, and the market can’t fill that demand. But ultimately when there is no demand, the government tries to encourage businesses to fill such a demand by offering them subsidies, special legislation and guarantee loans.
Of course, this creates distortions and malinvestment in the overall economy by misguiding resources and forcing businesses to retool. Inevitably, it leads to a bust.
Here is a superb quote from Hayek himself:
“We know: of course, with regard to the market and similar social structures, a great many facts which we cannot measure and on which indeed we have only some very imprecise and general information.”
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