Murray N. Rothbard, “The National Bureau and Business Cycles” (1988)

This is a short single-author economic polemic: Rothbard’s target is the National Bureau of Economic Research’s authority over the dating and interpretation of business cycles. The essay begins from a concrete 1988 problem—uncertainty over whether the economy is already in recession—and turns it into a methodological critique. Rothbard grants that some confusion is natural because data arrive late and trends are hard to distinguish from “glitches,” but argues that the confusion is intensified by economists’ deference to the Bureau.

Not knowing whether or not we're in a recession is not as silly as it sounds.

The central thesis is that the NBER’s apparently neutral recession dating is neither purely empirical nor theory-free. Rothbard treats the Bureau less as a technical clearinghouse than as an institution whose prestige converts contestable procedures into unquestioned economic fact. Its classifications force the economy into a binary state—boom or recession—even when activity may be stagnant, mixed, or indeterminate.

Everyone waits for the National Bureau to speak; when the oracle finally makes its pronouncement, it is accepted without question.

Rothbard’s first conceptual move is demystification. The Bureau’s social authority, he argues, comes from its private, respectable, quasi-academic institutional form and its self-presentation as a nonideological statistical enterprise. Its publications are “long on statistics” and sparse in explicit interpretation, giving the impression that conclusions rise automatically from the facts.

Its proclaimed methodology is Baconian: that is, it trumpets the claim that it has no theories, that it collects myriads of facts and statistics, and that its cautiously worded conclusions arise solely, Phoenix-like, out of the data themselves.

Against this Baconian self-image, Rothbard insists that measurement always contains theory. His critique is not that the Bureau uses data, but that it hides the interpretive assumptions embedded in data handling. The Bureau’s reference cycles and specific cycles depend on selecting peak and trough months; yet in real economic series, peaks and troughs may be flat, clustered, or ambiguous. Choosing the last month of such a plateau is, for Rothbard, not empirical humility but arbitrary construction.

And yet, despite its proclamations, the National Bureau’s procedures themselves necessarily manipulate the data to arrive at conclusions.

The essay’s technical core attacks the Bureau’s dating method. Rothbard argues that by reducing complex movements to single peak and trough months, then dividing the interval between them into equal parts, the NBER imposes a stylized geometry on economic reality. Activity that may have moved irregularly, stayed flat, or shifted unevenly becomes a neat sequence of expansion and contraction.

In short, National Bureau methods inevitably force the economy to look falsely like a series of jagged, sawtoothed, straight lines upward and downward.

Rothbard then broadens the critique from dating to historical averaging. The Bureau’s leading, coincident, and lagging indicators are produced by averaging cycles across long spans of history. This, he argues, assumes a stable underlying population of events—an assumption he finds especially implausible in economic history, where institutions, technologies, monetary regimes, and market structures change.

But that is a whopping assumption; history means change, and it is absurd to assume that the underlying population of all this data remains constant and unchanging, and therefore can be averaged meaningfully.

The essay’s final relevance lies in its warning about “measurement without theory.” Rothbard aligns himself with the Austrian suspicion of aggregate statistical smoothing: not because Austrians reject empirical reality, but because they regard raw historical events as particular and non-repeatable. Once data are adjusted, averaged, seasonally altered, and fitted into prefabricated cycles, the procedure may conceal rather than reveal economic truth.

Let that data be massaged, averaged, seasonals taken out, etc. and then the data necessarily falsify reality.

Rothbard’s argument remains significant as a critique of technocratic authority in macroeconomic discourse. He does not merely dispute one recession call; he challenges the legitimacy of allowing a statistical institution to define the business cycle by methods that appear neutral while embedding strong assumptions. The essay’s lasting point is that economic indicators are not self-interpreting: behind every official cycle chronology stand choices about classification, historical comparability, and the shape that reality is allowed to take.