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Those Vicious Business Cycles: Tamed but Not Quite Slain

THE stock market was booming. Companies were fighting their way into fast-growing foreign markets. Technology was transforming many industries.

A blue-chip panel of business leaders, economists and government officials hailed "the dynamic equilibrium of recent years,"and the "organic balance of economic forces." Their report on the nation's economic outlook concluded: "Our situation is fortunate, our momentum remarkable."

The time was mid-1929.

Economists have never displayed much skill in predicting recessions. But one thing is common, historians have found, to most periods just before a downturn -- the emergence of a widespread belief that this time we have found the magic elixir to produce an extended period of prosperity.

So it may be tempting fate now that so many economists, policy makers and business executives, looking out over an economic landscape defined by years of moderate growth and low inflation, are willing to judge the business cycle tempered if not tamed. But for all the risk of incurring the wrath of the economic gods -- and with the important caveat that recessions can never be completely ruled out -- it is clear that the economy has undergone such sweeping changes that it is arguably better equipped to maintain its long-run equilibrium.

"I have felt for a long time that the business cycle was diminishing in its severity, but it has not by any means been vanquished," Geoffrey H. Moore, the director of the Economic Cycle Research Institute in New York, said.