Chapter 13: The Cycle
A number of economists in the 1920s and 1930s were seeking to explain the fluctuations that were as troubling as the trend was good. These included Spiethoff, Pigou, Myrdal, Ohlin, Cassel, Robertson, the ubiquitous Hayek and Mises, Wesley Clair Mitchell, building on earlier authors like Marx, Jevons, Marshall, Bagehot and Tugan-Baranowsky. Economic statistics were becoming available, allowing investigators to support their analyses with facts. The downturn after the post-war restocking boom, closely followed by the Wall Street Crash in 1929, lent urgency to the possibility that dynamics could turn malign. Schumpeter knew that great issues were at stake when he entered into the debate. Schumpeter had touched on cycles in 1910 in his article on ‘Das Wesen der Wirtschaftskrisen’ and in 1911 in his Theory of Economic Development. He was still touching on cycles in his late works Capitalism, Socialism and Democracy and History of Economic Analysis. In 1927 there had been the article in Economica on ‘The explanation of the business cycle’. In 1939 there was Business Cycles. Published in two volumes and over 1000 pages in length, it was Schumpeter’s first book in a quarter of a century of papers. It was destined to become a classic that nobody read. The General Theory in 1936 (rapidly dynamised into a growth-model by Harrod and Domar) had captured the imagination of the younger generation, while the outbreak of the Second World War (much as Sarajevo had done for his earlier Economic Development) meant that the economics of moving disequilibrium had...
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