Flashback: THE MYTH OF THE TAMED BUSINESS CYCLE

Flashback 1985. The New York Times reports:

Most economic theory since World War II has been profoundly influenced by the work of John Maynard Keynes, and is based on the idea that government fiscal and monetary policies can alter the course of the economy, assuring longer expansions and shorter recessions. To prove the point, economists point to historical charts of the gross national product, showing that the economy has been much less volatile since 1945. But in the most highly-charged session at the Economic History Association, Christina Romer, an assistant professor at Princeton University, challenged that view. She believes the methods used to calculate the pre-World War II figures on G.N.P. and unemployment vastly overstate swings in the economy during that period. ''The conventional wisdom is that business cycles were twice as severe before 1929 than they are today,'' she said. But her research, she insists, shows the economy was more stable back then than is generally believed.

Questioning the Keynesian religion.