Real Business Cycles

Chapter 6Response to a Skeptic

Federal Reserve Bank of Minneapolis Quarterly Review 10(4), Fall 1986, pp. 28-33.

Edward C. Prescott Advisor Research DepartmentFederal Reserve Bank of Minneapolisand Professor of EconomicsUniversity of Minnesota

New findings in science are always subject to skepticism and challenge. This is an important part of the scientific process. Only if new results successfully withstand the attacks do they become part of accepted scientific wisdom. Summers (in this issue) is within this tradition when he attacks the finding I describe (in this issue) that business cycles are precisely what economic theory predicts given the best measures of people’s willingness and ability to substitute consumption and leisure, both between ...