Skyscrapers and Business Cycles

Abstract

The skyscraper index, created by economist Andrew Lawrence shows a correlation between the construction of the world’s tallest building and the business cycle. Is this just a coincidence, or perhaps skyscrapers do cause business cycles? A theoretical foundation of the “Cantillon effects” for the skyscraper index is provided here, showing how the basic components of skyscraper construction such as technology are related to key theoretical concepts in economics, such as the structure of production. The findings, empirical and theoretical, suggest that the business cycle theory of the Austrian School of economics has much to contribute to our understanding of business cycles, particularly severe ones.