It's the rational expectations, stupid

J.P. Koning makes an important point.

It's also about the irreversabilities. Even if rational expectations aren't assumed, but some sort of decent evolving forward looking expectations are assumed. If investments are easily reversible that might not be so bad. When investments are irreversible or can't be easily repurposed even good forward looking expectations can still cause these Austrian-flavored problems.

I'll include my usual disclaimer on all this: I think this makes sense in theory and there's a modest literature on it that shows there's even evidence that this actually happens - but I don't think it's a substantial enough thing to dictate policy decisions. We have a terrible recession because of a financial crisis due to all sorts of other problems with market psychology. We do not have a terrible recession because production structures were distorted and then later revealed to be unsustainable.