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1Business cycles and growth are considered as independent fields for decades. Indeed, after the Second World War, when macroeconomics began to develop through an increased use of mathematical models, the problem of analyzing growth-cycles dynamics appeared as a real (and certainly also mathematical) challenge. Some economists accepted that dichotomy, concentrating their attention on specific questions which they considered as better addressed in models specifically built in order to capture either long-run or short-run issues. Two subfields appeared: on the one side were business cycle theories which focused on understanding detrended data movements; on the other side was long-run growth theory which analyzed the existence and the stability of stationary paths. Even if one can identify an increasing tendency among economists to accept such a ‘division of labor’ between cycle and growth theories, there were also economists who never ceased to consider this dichotomy only as a pedagogical organization. One can indeed identify economists who were fully aware of the restrictions imposed by such a dichotomy and then proposed to explore the various lines of research which could analyze how cycles and growth dynamics can intertwine. Although the intensity of research in that field fluctuated sometimes, interest of macroeconomists for that question never fully disappeared.

2At least two major episodes exist for which the idea of cycles – and consequently of the interaction between cycles and growth dynamics – ceased to be in the priorities of the agenda: (i) in the late 1960s, when Bronfenbrenner [1969] emphasized the lack of interest of macroeconomists for cycle analysis and (ii) more recently, when leading economists spread the idea that the central problem of depression / prevention has been solved (cf. Lucas [2003]) and that such a statement was also confirmed by practitioners [3] for whom “[o]ne of the most striking features of the economic landscape over the past twenty years or so has been a substantial decline in macroeconomic volatility.” [Bernanke, 2004] [4]

3After the obvious return of instability and depression, [5] interest for growth – cycle’s analysis is emerging again, and though one cannot still [6] say that this question has been solved, it becomes more and more difficult to consider this (artificial) division as a scientific choice. Indeed, more than “just” the unsatisfactory understanding of economic fluctuations, this dichotomy has a second consequence: the two subfields became so independent that debates on potential beneficial effects of stabilization policies clearly disappeared from the forefront of the field. [7]

4One can also notice that when nevertheless the modern literature addresses the question of the growth cycles interactions, it does it through models which deal with those issues in a totally new analytical framework which makes difficult to evaluate effective progress in our understanding of such complex issues. On the one side, one cannot deny that various modern approaches dealing with the influence cyclical fluctuations can have on growth, sometimes offering competing views, [8] have recently provided a strong revival for those issues (stimulating also a large amount of empirical investigations). On the other side, and despite the use of sophisticated mathematical or computational devices, one can doubt that those models are more relevant than their ancestors. We then believe that incursions in the field of history of economic thought not only reminds us forgotten topics but also helps to understand to what extent the way economists address those questions has been affected by the evolution of modeling.

5The purpose of this special issue is try to shed light of the diversity of approaches and modeling and most touchy problems macroeconomists had to deal with. [9] More precisely, its purpose is to pay attention to different lines of thought addressing growth cycle connection. Since economists dealing with that question naturally came to identify the need (or not) for stabilization or for growth enhancing policies, this special issue will also include papers which addressed the potential necessity and the nature of the economic policies which should be implemented in order to guarantee growth.

6Matthews already noticed in the late 1950s that “there is less agreement among economists about the relation between trend and cycle than about most other topic in the theory of the cycle” [1959: 253]. [10] The selection of contributions which compose this special issue may help to have an idea of the variety of approaches which have dealt with that question.

7The story of macroeconomics is traditionally explained as continuity or antagonism to Keynes’s contribution. Kevin Hoover proposes in this first paper to show how the (hi)story of macroeconomics, far from being so simple, is characterized by different views, not only concerning the variety of competing analytical frameworks but also with regard to the true nature of economics. More precisely, Hoover emphasizes in his prologue that “the notion that an economy is an object to be controlled by policy is pervasive.” One can then identify two dominant metaphors: the first considers economists as engineers in charge of controlling a “machine”; it represents a mechanical approach which was developed by the well-known Ragnar Frisch and Jan Tinbergen; the second sees the economy as an organic entity and economists as physicians, it is the so-called “medical” approach and corresponds to Keynes’s vision. Behind those visions, there is an interrogation about the fundamental nature of the economy, an element which determines the way economists conceive economic policy and then articulate short and long run analysis. After presenting these different notions of what an economy is, Hoover shows that recent new classical macroeconomics, which strongly attacked the macroeconometric models in the tradition of Tinbergen, is nevertheless based on an amalgam of the medical and mechanical metaphors. Indeed they were successful in combining human decision-making with the mechanical models but only because they “applied highly simplified microeconomic models to aggregate data”, an obviously dangerous shortcut, especially when those models have to produce economic policy advices.

8The next two papers are concerned with the contribution of Joseph A. Schumpeter who is a central figure of the growth cycles analysis. The first paper provides a theoretically grounded graphical interpretation of some of Schumpeter’s core theoretical conclusions on economic development. Niels Geiger notes that if the necessity emphasized by Schumpeter to deal with a growth and cycles interactions is well known, the technical separation he operates between growth trend and cyclical waves in real-world economies is more rarely discussed. Starting from Schumpeter [1927], the author comes back to the distinction Schumpeter makes between static and dynamic conditions. The first ones characterize the circular flow of an economy in, or in close proximity of, equilibrium, and are compatible with growth factors. In this case, changes are gradual which means that they can be absorbed by adaptive behavior, and that the economy can be maintained in the neighborhood of the equilibrium. On the contrary, dynamic conditions are necessary to account for business cycles [Schumpeter, 1927: 289]. Finally this paper proposes an original figure which provides a graphical representation of Schumpeter’s ideas combining both, the ideas of cyclical and growth movements.

9After drawing a clear picture of the different ways cycles and growth dynamics can intertwine (or not), Alain Raybaut’s paper proposes to examine two Schumpeterian models which were developed in the 1950s by Smithies [1957] and Goodwin [1955]. At that time Schumpeter was the leading exponent of the view which considers that cycles and trend are not only intertwined but indistinguishable. Smithies emphasizes the Schumpeterian vision that economic dynamics is characterized by a process of disruption which leads the economy from one equilibrium position to the other, and described it with a two states linear model, while Goodwin prefers to analyze the role of technical progress in a nonlinear framework. They nevertheless both failed in overcoming the fundamental difficulty already identified [11]: indeed Alain Raybaut shows that, despite his claim, Smithies does not provide a purely endogenous explanation for business cycles and growth, and Goodwin, pursuing a more promising perspective, did not succeed in connecting Schumpeterian with Keynesian insights about investment dynamics.

10Schumpeter was also the economist who considered fluctuations as the superposition of different waves or cycles characterized by varying amplitudes. In that line of research, but focusing on the views of Kuznets and Kondratieff, Claude Diebolt offers a comprehensive presentation of what can be the contribution of cliometrics to our understanding of the nature of economic movements. Combining historical, statistical and mathematical methods, cliometrics can contribute to gain insights at a theoretical level. The author then examines various national series and concludes the existence of a single intermediate cycle, a Kuznets swing with 15–20 years frequency which contradicts, at least partially, previous contributions which gave support to the existence of long-term economic cycles. Such a result gives support for more concerted and cooperative economic policies at the international level.

11The years of High Theory (1926–1939) [12] are known as the years during which macroeconomics but also econometrics and national accounting emerged. Amanar Akhabbar concentrates his attention on models based on a disaggregated macroeconomic production function: namely, the models of Marschak, Frisch and Leontief. The paper shows that these models share a common view on the growth cycles interactions. The three models based their analysis of growth–cycles interaction on the circulation of capital goods among producers examining two different causes: the first one is the spread of economic change through producers and the second is due to coordination problems between producers in the capital circulation process.

12One of the pioneering authors of the growth-cycles analysis, [13] and of dynamics in general, is Roy Harrod. His seminal 1939 contribution is well-known – even if most of the time misinterpreted – but only few historians of economic thought have dedicated attention to his 1936 book, The Trade Cycle. Michaël Assous, Olivier Bruno and Muriel Dal Pont Legrand propose a closer investigation of the first hints Harrod provided for the dynamics he developed later. [14] Harrod initially emphasized the importance of imperfect competition for trade cycle theory because of its compatibility with decreasing cost. The exploration of the implications of decreasing cost brought him to the conclusion that imperfect competition can provide an equilibrium approach to business cycles relying upon the existence of multiple longperiod equilibria. Instability may then result from alternative producers (correct) expectations leading successively the economy in position of high and low equilibria. Relying on imperfect competition, Harrod later explains that turning points may result from changes in the value of the multiplier and the accelerator coefficients. It is in that context that the Law of Diminishing Elasticity of Demand (LDED) comes into play: changes in demand elasticity are likely to change income shares. This paper proposes first to clarify the precise role Harrod assigned to the LDED in the understanding of the trade cycle; secondly it shows how Harrod used the LDED in order to give microeconomic foundations to a non-linear saving function that may give rise to an endogenous countercyclical value of the multiplier. This paper sheds light on an element which has been undermined by most of the readers and which finally places Harrod as a pioneer of endogenous business cycle analysis before the seminal work of Samuelson [1939].

13Johannes Schwarzer analyses a debate which took place in the early 1960s when the existence of an optimal level of demand, i.e. a level maximizing the rate of growth, was controversially discussed. The main idea was that “good demand management would dampen cycles, being then an efficient regulation tool for economic policy purpose. That regulation of the economy step by step, period by period, would allow the economy to follow a sustained growth path. Logically, the cycle became “a thing of the past” [Minsky, 1968: 45], and the attention of the economists became absorbed by short-term economic policies. There existed then a rather large consensus on the idea that sustained growth was the outcome of successful stabilization policies which, dampening business cycles, could maintain the economy at full capacity output. The author gives a survey of the debates which developed within this field and identifies three different views—the Keynesian, the Paishian and the skeptical one—the first two ones sharing the idea that high demand in the short and medium-run may foster growth, the last one providing arguments against this view. The conclusion outlines what we could learn from the debates of the 60’s but also what may have been lost since Friedman’s introduction of a “natural rate of unemployment” into the Phillips curve concept.

14The last contribution follows the same line of research: without directly discussing the interaction between cycles and growth dynamics, the paper questions the efficiency of stabilization policies, which is a crucial issue. Indeed, all the discussions about the influence cycles can have on growth, or more generally about the impact short-run fluctuations can have on long-run (growth) dynamics, have in fine to decide whether there is a need for stabilization policies. Eric Nasica addresses this question in a Minskyan analytical framework. He starts showing the influence nonlinear business cycles models à la Hicks had on Minsky’s own analysis of fluctuations. Minsky’s financial instability hypothesis is then reassessed. The author explains how banks’ behavior undermines the efficiency of stabilization policies and determines the nature of economic fluctuations. The author concludes by assessing the relevance this sort of approach can have in order to understand recent pre- and post-crisis stabilization policies.


  • [1]
    The present issue contains a selection of the papers presented at the 14th International Conference of the Charles Gide Association for the Study of Economic Thought, at the University Nice Sophia Antipolis and GREDEG CNRS, May 2012, in a revised version after having been submitted to the usual refereeing process.
    The authors of this introduction benefited a lot from earlier discussions with Harald Hagemann, and which are developed in Assous, Dal Pont Legrand and Hagemann [2015] in an extended version.
  • [2]
    Department of Economics, University of Paris I, Pantheon-Sorbonne, PHARE. E-mail:
    University of Lille 1 and Clersé CNRS. E-mail:
  • [3]
    In 2004, Ben Bernanke was already the governor of the Fed.
  • [4]
    In the early 2000s this opinion is shared by a large variety of economists.
  • [5]
    If a great majority of theoreticians seem to have discovered again the instability of economic activity, one can also find some cleaver economists [Krugman, 2009], not only among historians of economic thought, who never forget the periodicity of crises, and who never ceased to argue in favor of modeling approaches which could allow to take into account (monetary and financial) economic instability.
  • [6]
    Cf. Solow [1988] “The problem of combining long-run and short-run macroeconomics has still not been solved.” [p. 310].
  • [7]
    One notable exception occurs when endogenous growth models were used in order to deal with business cycles (see Stadler [1990] for one of the pioneering contributions).
  • [8]
    See, for instance, the debate within the New Growth Theory between the literature based on learning by doing versus learning or doing mechanism on the impact shocks can have on growth.
  • [9]
    See Assous, Dal Pont Legrand and Hagemann [2015] for a more detailed survey of this literature.
  • [10]
    Quoted by Alain Raybaut in the introduction.
  • [11]
    See, for instance, Pasinetti [1960].
  • [12]
    There is the well-known reference to Schackle’s 1967 book The Years of High Theory: Invention and Tradition in Economic Theory 1926-1939, GLS Shackle, Cambridge University Press.
  • [13]
    Cf. Bruno and Dal Pont Legrand [2014].
  • [14]
    One can mention here the paper of Rodolphe Dos Santos Ferreira, Claude d’Aspremont and Louis-André Gérard-Varet “Imperfect competition and the trade cycle: Aborted guidelines from the late 1930s”, History of Political Economy, 2011, 43(3): 513–36.


  • Assous M., Dal Pont Legrand M. and Hagemann H. [forthcoming, 2015]. Business cycles and economic growth. In G. Faccarello and H.D. Kurz (Eds) Handbook of the History of Economic Analysis, Volume I Great Economists since Petty and Boisguilbert. Cheltenham: Edward Elgar Publishing.
  • Bernanke B. [2004]. The Great Moderation. 20th February. <>.
  • Bronfenbrenner M. [1969]. Is the Business Cycles Obsolete? New York: Wiley Interscience.
  • OnlineBruno O. and Dal Pont Legrand M. [2014]. The instability principle revisited: an essay in Harrodian dynamics. European Journal for the History of Economic Thought 21(3): 467–84.
  • OnlineHarrod, R. [1939]. An essay in dynamic theory. Economic Journal 49: 14–33.
  • Krugman P. [2009]. The Return of Depression Economics and the Crisis of 2008. New York: W. W. Norton.
  • OnlineLucas R. [2003]. Macroeconomic priorities. American Economic Review 93(1): 1–14.
  • Matthews R.C.O. [1959]. Duesemberry on Growth and Fluctuations. The Economic Journal 69(2, part 1): 133–45.
  • Solow R.M. [1988]. Growth theory and after. American Economic Review 78(3): 307–17.
  • Stadler G.W. [1990]. Business cycle models with endogenous technology. American Economic Review 80(4): 763–78.
Michaël Assous
Muriel Dal-Pont Legrand [2]
Uploaded on on 03/09/2018
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