Milton Friedman’s Plucking Model Has Been Used to Argue Against the Relevance of the Austrian Business Cycle Theory

Milton Friedman’s “Plucking Model” has been used to argue against the relevance of theories of the “boom” preceding economic downturns, such as Austrian Business Cycle Theory (ABCT). According to Friedman, output data show that economies follow a trend, with recessions being temporary setbacks prior to a return to a trend approaching the economy’s maximum feasible output. Economies do not substantially go over trend during a boom; they collapse and then return to trend. Recessions “pluck” output downwards, but booms do not have similar effects in the opposite direction, as shown in Figure 1. Therefore, busts are what is to be explained, not the boom. While defenders of ABCT have objected to this interpretation, it remains an effective rhetorical point among macroeconomists.

--Ryan H. Murphy, "The Plucking Model, the Great Recession, and Austrian Business Cycle Theory," Quarterly Journal of Austrian Economics 18, no. 1 (Spring 2015): 40-41.