As a tool for analyzing and influencing the economy, is the business cycle outdated? Yes, says the Bank for International Settlements (BIS) in Switzerland.
For the mainstream, smoothing the business cycle is job one. The aim is to prolong its expansions and avoid or minimize its recessions. Until the Great Recession — and excluding the inflation-caused recessions of the 1970s and early 1980s — America's post-World War II record looked good. Deft shifts in interest rates by the Federal Reserve and the economy's natural recuperative powers sustained growth. The longest U.S. expansions lasted a decade (1991-2001) and nearly nine years (1961-69).
The record doesn't impress anymore. Economists' confidence has been shaken; so has the public's. As the BIS says in its report: "The crisis that erupted in August 2007 and peaked roughly one year later marked a defining moment in economic history. It was a watershed, both economically and intellectually: we now naturally divide developments into pre- and post-crisis."