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.
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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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