At the same time, households adjust their consumption, not least of capital goods, to a more realistic assessment of income’s long-term trend. Seen in the context of innovations, there is no ready-made pattern for either the occurrence of a cyclical downturn or how quickly it can be reversed. A third basic insight from the Austrian school concerns economic policy’s limitations. If a leap forward in technology leads to a period of unsustainable growth of investment and consumption, there is bound to be a recoil. As argued in the 1970s not least by Fredrich Hayek, perhaps the foremost of the Austrians and a Nobel prize-winner, the necessary adjustment after a supply shock cannot be avoided by trying to bridge the trough with measures of economic policy. As an adjustment to more realistic expectations must come, a bridging policy will simply postpone it and presumably make it more difficult when it eventually happens. But history also teaches us that after a period of what I would call growing pains, optimism about the new technology’s potential will be restored in a more orderly and realistic form. Neither the sudden downturn in the global economy nor the terrorist attacks on 11 September should have changed the grounds for a positive appraisal of the new technology in the somewhat longer run. Signs in the summer of stabilisation in the United States During the summer there were signs that economic activity in the rest of the world was becoming more stable.
If we can succeed in implementing the reforms that are still outstanding, there is a chance that economic growth can be propelled to a level beyond the current economic upswing. BIS Review 100/2006  1