GOTTFRIED HABERLER, Harvard University
One of the main advantages claimed for comprehensive economic planning is that it would do away with the business cycle. In a planned economy, its advocates say, the waste of recurrent, cyclical depressions would be eliminated and, needless to add, there would be no room for chronic unemployment and secular stagnation. There may not be literally full employment all the time, but general cyclical unemployment and, of course, general long-run unemployment from which unplanned 'mature' economies are supposed to suffer are effectively barred from planned economies.
But is this claim really justified? Is a planned economy really immune to cyclical fluctuations? Or are there fluctuations of a different nature and different time shape? If there are really none at all, what is the price, in terms of regimentation, long-run efficiency, and progress, which the economy has to pay for that immunity?1
Nobody will deny that these are important questions. But they are not easy to answer. They are really unanswerable if we want to live up to the austere and exacting principles of scientific procedure and proof that govern the work of the National Bureau of Economic Research. I am afraid we shall have to lower our standards of scientific rigor quite a bit and indulge in a considerable amount of theorizing, speculation, and guessing in order to be able to say anything at all!
We shall have, first, to clarify what exactly we mean, by 'business cycle'. Later it will be necessary also to get some idea about the nature of the causal mechanism that is responsible for the cycle. Without any idea about the forces that produce cyclical fluctuations in economic activity, it is impossible to decide whether there will be such fluctuations in a planned economy. Only if we had a large amount of empirical material concerning planned economies, that is to say, if we could observe whether planned economies have in fact been subject to cyclical fluctuations, could we____________________