Big economic discovery! Booms may really be the cause of busts

DO economic booms cause economic busts?

To a lot of people, this seems like a silly question to even ask. Of course booms cause busts, they say. Excessive greed or optimism or easy credit leads to overinvestment, soaring asset prices and unsustainable borrowing binges. What goes up must come down, and the surest sign of a bust tomorrow is a boom today. So many people instinctively believe this theory that it would astonish most people to learn that for the last half-century this hasn't been the way macroeconomists - the type working as university professors, anyway - think about the business cycle.

For the past half-century, the academic macro story has gone something like this: There is a general trend of rising growth and prosperity in the US economy, caused by steady improvements in technology. But this steady course is disturbed by unpredictable events - "shocks" - that temporarily slow growth or speed it up. The shocks might last for a while, but a positive shock today doesn't mean a negative shock tomorrow. Recessions and booms are like rainy days and sunny days - when you look back on them, it looks like they alternate, but really they're just random.