Exchange, Action, and Social Structure: Elements of Economic Sociology

By Milan Zafirovski | Go to book overview

Chapter 7
The Social Construction of
Exchange (Business) Cycles

EXCHANGE CYCLES IN (NEO)CLASSICAL ECONOMICS

In neoclassical economics, exchange or business cycles are viewed as phenomena immanent to the capitalist economy. Thus, most neoclassical economists regard business cycles as economic changes, more precisely fluctuations or oscillations, inherent to the operation of the marketeconomic system (Haberler 1943:392; Pareto 1927:532–34; Schumpeter 1939:7). Also, some non-orthodox (historical) economists regard business cycles as being inherent to the capitalist economy, stating that the economic process becomes understandable only if one analyzes it from the stance of “rhythmic movements” manifested in the “influx and reflux” of the periods of expansion and depression (Sombart 1932:60). In this connection, even heterodox economists such as Keynes (1936:293) acknowledge that trade or business cycles, albeit responsible for “disastrous excesses and grave crimes,” have a role to play in a “progressive” society and warn that efforts to eliminate these cycles can produce stagnation and stability (i.e., a stationary state). However, such an outcome may be unattainable and undesirable insofar as expansion, instability, and dynamics are a natural state of a modern capitalist economy. From this perspective, “stabilized capitalism” is seen as a contradiction in terms, because such a stabilization would be generative of its own “abnormalities and instabilities,” and thus a capitalist economy could not attain a stationary state without being “vitally affected” (Schumpeter 1939:1033). Simply, business cycles, including crises or depressions as their particular stages can be more useful than harmful (Pareto 1927:532).

Traditional economic theory usually defines business cycles as expres-

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