Business Cycles

business cycles, fluctuations in economic activity characterized by periods of rising and falling fiscal health. During a business cycle, an economy grows, reaches a peak, and then begins a downturn followed by a period of negative growth (a recession), that ends in a trough before the next upturn. The theory of business cycles is generally attributed to French physician Clement Juglar, who proposed in 1862 that such fluctuations were to be expected in any economic system. Other later theorists developed Juglar's theory, arriving at business cycles of anywhere from 10 years to the half-century cycle suggested by Russian economist Nikolai Kondratieff. Many attempts have been made to equalize business cycles through monetary and fiscal policy decisions. During the 1970s and 80s, for instance, U.S. fiscal policy deliberately created a recession to combat inflation. Theories on the causes of business cycles consider various possible factors; however, none has conclusively delineated the underlying causes for fluctuations. Such 20th-century theorists as John Maurice Clark and Joseph Schumpeter have attempted to find cures for economic instability, rather than describing it as simply a natural phenomenon in the manner of many 19th-century theorists. The "underconsumption" theory, for instance, claims that an inordinate amount of income goes to the wealthy rather than to investment, thus producing instability.

See R. J. Gordon, ed., The American Business Cycle (1986) and W. C. Mitchell, Business Cycles and Their Causes (1989); A. W. Mullineux, Business Cycles and Financial Crises (1990).

The Columbia Encyclopedia, 6th ed. Copyright© 2018, The Columbia University Press.

Business Cycles: Selected full-text books and articles

Business Cycles and Their Causes By Wesley Clair Mitchell University of California Press, 1941
Business Cycles: The Problem and Its Setting By Wesley C. Mitchell National Bureau of Economic Research, 1954
What Happens during Business Cycles: A Progress Report By Wesley C. Mitchell National Bureau of Economic Research, 1951
Measuring and Interpreting Business Cycles By Villy Bergström; Anders Vredin Clarendon Press, 1994
Beyond Shocks: What Causes Business Cycles? an Overview By Fuhrer, Jeffrey C.; Schuh, Scott New England Economic Review, November-December 1998
The Business Cycle: It's Still a Puzzle By Christiano, Lawrence J.; Fitzgerald, Terry J Economic Perspectives, Vol. 22, No. 4, Winter 1998
Reflections on the Development of Modern Macroeconomics By Brian Snowdon; Howard R. Vane Edward Elgar, 1999
Librarian's tip: Chap. 6 "The Ups and Downs of Modern Business Cycle Theory"
Theorists of Economic Growth from David Hume to the Present: With a Perspective on the Next Century By W. W. Rostow; Michael Kennedy Oxford University Press, 1990
Librarian's tip: Chap. 10 "Business Cycles and Growth: From Juglar to Keynes" and Chap. 11 "Business Cycles and Growth: Keynes and After"
The Business Cycle Theory of Wesley Mitchell By Sherman, Howard Journal of Economic Issues, Vol. 35, No. 1, March 2001
The New View of Growth and Business Cycles By Fisher, Jonas D. M Economic Perspectives, Vol. 23, No. 1, Spring 1999
Business Cycles and Turning Points: A Survey of Statistical Techniques By Massmann, Michael; Mitchell, James; Weale, Martin National Institute Economic Review, January 2003
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