[2270] Of long run growth versus business cycle

For some economists, such as Prescott (1996), the renewed interest in growth over the last 20 years stems from their belief that business cycle fluctuations ”˜are not costly to society’ and that it is more important for economists to worry about ”˜increasing the rate of increase in economy-wide productivity and not smoothing business fluctuations’. This position has been publicly expressed earlier by Lucas in May 1985 when delivering his Yrjo Jahnsson lectures. There he argued that post-1945 economic stability had been a relatively ”˜minor problem’ especially in comparison ”˜to the costs of modestly reduced rates of growth’ (Lucas, 1987). More recently, Lucas (2003) has repeated this message using US performance over the last 50 years as a benchmark. Lucas argued that ”˜the potential for welfare gains from better long-run, supply-side policies exceeds by far the potential from further improvements in short-run demand management’. [Brian Snowdon. Howard R. Vane. Page 33. Modern Macroeconomics: Its Origin, Development and Current State. 2005]