Keynesian macroeconomics postulated that the economy slips into recessions for all sorts of reasons such as shifts and turns in the animal spirits and a loss of consumer confidence leading to a fall in autonomous investment and autonomous consumption. A collapse in autonomous investment and autonomous consumption is the Keynesian explanation for the great depression.

Both Keynesian macroeconomics and real business cycle theories, at least at the outset couldn’t explain why there were recessions. Both attributed to them to causes they were yet to explain. Keynesian macroeconomics  could not explain what drove the waves of optimism and pessimism that  either sharply increased or reduced investment.

Real business cycle theorists attributed recessions and booms to productivity drops in productivity surges, which initially were not explained in themselves. This theory sees productivity shocks as the cause of economic fluctuations. For example, if productivity falls, current returns to working and investing decline, so…