Business Cycles and Their Causes

Business Cycles and Their Causes

Business Cycles and Their Causes

Business Cycles and Their Causes

Excerpt

The review of theories in Part I of my Business Cycles and the statistical study of the phenomena of cycles in Part II had a common purpose--to provide suggestions and materials for framing an account of the rhythmical alternations of prosperity, crisis, depression, and revival in the modern business world.

Now the recurrent phases presented by economic activity, wherever it is dominated by the quest of profits, grow out of and grow into each other. An incipient revival of activity, for example, develops into full prosperity, prosperity gradually breeds a crisis, the crisis merges into depression, depression becomes deeper for a while, but ultimately engenders a fresh revival of activity, which is the beginning of another cycle. A theory of business cycles must therefore be a descriptive analysis of the cumulative changes by which one set of business conditions transforms itself into another set.

The deepest-seated difficulty in the way of framing such a theory is that while business cycles recur decade after decade each new cycle present idiosyncrasies. Business history repeats itself, but always with a difference. This is part of what is implied by saying that the process of economic activity within which business cycles occur is a process of cumulative change.

A thoroughly adequate theory of business cycles, applicable to all cycles, is consequently unattainable. Even if some one . . .

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