Skyscrapers and the Business CycleSubmitted by The Rebel Poet on Fri, 07/26/2013 - 13:27
"The ability of the index to predict economic collapse is surprising. For example, the Panic of 1907 was presaged by the building of the Singer Building (completed in 1908) and the Metropolitan Life Building (completed in 1909). The skyscraper index also accurately predicted the Great Depression with the completion of 40 Wall Tower in 1929, the Chrysler Building in 1930, and the Empire State Building in 1931. There are, however, important exceptions in the ability of the index to predict, so the first question is: how good of a predictor is the skyscraper index?
Second, what is the nature of the relationship between skyscraper building and the business cycle? Surely, building the world's tallest building does not cause economic collapse, but just as clearly, there are economic linkages between construction booms and financial busts. What theoretical connections can be made between skyscraper building and business cycles? Andrew Lawrence noted overinvestment, monetary expansion, and speculation as possible foundations for the index, but did not explore these issues. With the destruction of the World Trade Towers and the increased threat of terrorism, the skyscraper index may have already lost its usefulness for future prediction, but even if that were the case, the theoretical linkages between skyscraper building and business cycles may still have usefulness in improving our understanding of business cycles and the economic theory behind them."