The Hangover Theory: Are recessions the inevitable payback for good times?

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Call it the overinvestment theory of recessions, or "liquidationism," or just call it the "hangover theory." It is the idea that slumps are the price we pay for booms, that the suffering the economy experiences during a recession is a necessary punishment for the excesses of the previous expansion... hangover theory is disastrously wrongheaded.

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"Austrian theory" of the business cycle -- a theory that I regard as being about as worthy of serious study as the phlogiston theory of fire.
Paul Krugman, "The Hangover Theory: Are recessions the inevitable payback for good times?The Hangover Theory: Are recessions the inevitable payback for good times?"