Skyscrapers are usually associated with economic success, but some economists say they’re the sign of a financial bubble about to burst.The Skyscraper Index is a whimsical concept put forward by Andrew Lawrence, a property analyst at Dresdner Kleinwort Wasserstein, in January 1999, which showed that the world’s tallest buildings have risen on the eve of economic downturns.
image credit: theshovel
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.
image credit: economicreason
Mark Thornton’s Skyscraper Index Model successfully sent a signal of the late-2000s financial crisis at the beginning of August 2007.buildings may actually be completed after the onset of the recession or later, when another business cycle pulls the economy up, or even cancelled.
Unlike earlier instances of similar reasoning (“height is a barometer of boom”), Lawrence used skyscraper projects as a predictor of economic crisis, not boom.
Careful statistical study has found that the height of buildings cannot be used to accurately predict recessions or other aspects of the business cycle, but that GDP can predict the height of building construction.