It all got started in Jan 1999 by Andrew Lawrence, a research director at Dresdner Kleinwort Wasserstein who came up with the idea of the Skyscraper Index and its correlation with economic downturns:
The Skyscraper Index is a concept put forward in January 1999 by Andrew Lawrence, research director at Dresdner Kleinwort Wasserstein, which showed that the world's tallest buildings have risen on the eve of economic downturns. Business cycles and skyscraper construction correlate in such a way that investment in skyscrapers peaks when cyclical growth is exhausted and the economy is ready for recession. (Skyscraper Index on Wikipedia)I was amazed and surprised to find that Austrian Economist Mark Thornton has actually been studying the relations between the construction of record setting skyscrapers and economic cycles.
Mark Thornton has published two papers both available on the Mises Institute web site. Here are the links to the first and the second.
Here is the abstract of first paper:
The construction of skyscrapers that qualify as the “World’s Tallest Building” tends to coincide with major downturns in the economy. The Skyscraper Index, created by economist Andrew Lawrence shows a high level of correlation between skyscraper construction and the business cycle. Is this just a coincidence, or perhaps do skyscrapers cause business cycles? A theoretical foundation of “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.For those lazier among us, he has given numerous very interesting presentations about the historical and economics facts that lead to his conclusions. Embedded below is a 30 min must see session, presented at "Our Enemy, Inflation," the Mises Circle in Houstonon Saturday, 24 January 2009.
Below are a few more useful YouTube links, and I am not embedding in order to avoid an oversized post:
- Skyscrapers and the Housing Crisis [Mark Thornton] Presented at the Ludwig von Mises Institute's 2009 Mises University held in Auburn, Alabama. (50 min)
- Skyscrapers and the Housing Crisis | Mark Thornton Lecture presented by Mark Thornton at the Ludwig von Mises Institute's 2010 Mises University conference, the world's leading instructional program in the Austrian School of economics.
- Skyscrapers and Economic Cycles: An Interview with Mark Thornton (The Lew Rockwell Show #25)