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Business cycles, in economics, are periods which alternate between prosperity and depression. They have occurred with varying amplitudes and periods of duration since the advent of the Industrial Revolution. Fluctuations in output are accompanied by fluctuations in employment and income. Cycles are not precisely repeated because their causes are complex and variable. Some students of the business cycle measure cycles from trough to trough or peak to peak. Joseph Schumpeter (1883 - 1950) argued that this was improper and inconsistent with the historical driving forces. He identified four stages of the cycle: prosperity (expansion from an equilibrium to the peak); recession (decline from the peak to the next point on the trend line); depression (further fall to the trough); and revival (expansion from the trough to the next equilibrium on the trend line). He measured the business cycle from equilibrium through the four phases to the next equilibrium. The National Bureau of Economic Research, on the other hand, identified two phases, expansion and recession, and measures business cycles from peak to peak or trough to trough.
The Kondratieff cycle is a business cycle named after a 19th-century Russian economist, Nikolai Kondratieff, who identified cycles of economic activity spanning 50 to 60 years. His book The Long Waves in Economic Life was published in 1925. It implied that capitalism had a secular stability, while Russia\'s Marxist leaders claimed it was self-destructively unstable. His work has attracted renewed interest recently as economists seek to explain the causes of the post-1973 recession. Unfortunately, Kondratieff does not prove very enlightening. His statistics established cycles from the later 1780s to 1844-51, from 1844-51 to 1890-96, and an upswing from 1890-96 to 1914-20 (which was followed, his adherents point out, by about 25 years of downswing, the 25 golden postwar years, and now by recession.) But Kondratieff\'s analysis was, at best, sketchy. TF
See also depression; gross national product.Further reading Robert E. Lucas, Models of Business Cycles; Studies in Business-Cycle Theory. |
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