Edited by Dimitri B. Papadimitriou
Chapter 10: Conclusion: Business Cycle Theory and Economic Policy
It has been shown that both linear and non-linear accelerator models, standing by themselves, are not suﬃcient for business cycle analysis. However, it was assumed that such ﬂow of income models can be used as a core, a skeleton structure, for cycle theory. This use of accelerator models focuses attention upon the determinants of the parameters of the models, and it is shown that the parameters of these models depend upon the behavior of elementary economic units. Accepting the work that has been done on the relation between households and the propensity to consume, the relation between individual ﬁrm behavior and the accelerator coeﬃcient has been investigated. In particular, the relationships between induced investment and ﬁnancial constraints and market structures have been studied. It cannot be claimed that the ﬁndings are deﬁnitive; in fact, the major purpose of setting out on this track was to test the plausibility of the approach. In addition, the tool of analysis selected, a modiﬁcation of Marshallian price theory, may be too weak and the factual basis for the transformation of the ﬁndings into a value of the accelerator coeﬃcient is lacking. Certainly the economic theory of the investment behavior of individual ﬁrms and the testing of the theory of the investment are among the major problems in economics. Nevertheless, some results, which may be viewed as the most tentative of hypotheses, have been obtained. It has been shown that the investment response of conditional monopolies to a change in...
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