Summary of Business Cycles and Equilibrium

Business Cycles and Equilibrium is an academic work by economists Thomas J. Sargent and Neil Wallace exploring the observation that economies tend to experience fluctuations, or business cycles, and the difficulties economists have in explaining them. Through a comparison of various economic theories, including Keynesian, Real Business Cycle (RBC), and New Classical, Sargent and Wallace argue in favor of a micro-founded RBC explanation. They then discuss the implications and possibilities this outlook offers for economic policy, such as rules for setting variable taxes. The book is aimed at an academic audience, and assumes a good understanding of economics theory and concepts.