The Economic Way of Thinking 13th Edition by David Prychitko, Peter Boettke, Paul Heyne

Exercise 1

Karl Marx believed that the boom-bust cycle is an inherent and natural feature of the market-capitalist economy. While most Marxists have jumped ship, today some of the more radical followers of John Maynard Keynes (who call themselves Post Keynesians) argue that increased entrepreneurial risk taking will inevitably create booms and corresponding collapses. In fact, they say the Great Recession confirms their case. But this much is true: nations have some sort of central bank that manipulates the money supply, and often those banks face political pressures to create cheap credit, which your authors argue can launch unsustainable booms. Do you think this supports the claims that booms and busts are a natural feature of capitalism?