Attempts to measure economic aggregates precisely have failed to forecast the boom and bust cycle accurately, but economists who focused on basic cause-and-effect relationships among economic phenomena were among the most prescient predictors of the 2000 stock-market bubble and crash. While some analysts noted correctly that price-to-earnings ratios were unduly inflated, it was economists of the Austrian school who offered an explanation for why stock-market valuations had become inflated and unsustainable.

Mark Thornton is a Research Fellow at the Independent Institute and Senior Fellow at the Ludwig von Mises Institute.
Banking and FinanceBusiness and EntrepreneurshipEconomy
Other Independent Review articles by Mark Thornton
Spring 2014 Smuggler Nation: How Illicit Trade Made America
Spring 2013 American Nightmare: How Government Undermines the Dream of Homeownership
Summer 2010 Modernizing a Slave Economy: The Economic Vision of the Confederate Nation
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