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The US Business Cycle Since 1950: A Post Keynesian Explanation

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  • John Harvey

    () (Department of Economics, Texas Christian University)

Abstract

That the economy goes through periods of expansion and recession is obvious. Whether or not this represents endogenously-generated cycles or simply stochastic variation around a trend is, however, a matter of debate. Among mainstream economists, the latter is the predominant position. For Post Keynesians, however, business cycles are a manifestation of the systemic instability inherent to the capitalist system. Endogenous fluctuations in investment spending lie at the heart of the shift from expansion to recession and while various shocks and government policies can, of course, have an impact, they are unnecessary to create the patterns we see. This paper offers evidence in support of the Post Keynesian position by tracing the US business cycle since 1950. With a combination of quantitative and qualitative evidence, it is demonstrated that, from the Korean War cycle to our current financial crisis, the central factor has been the rise and fall in investment. The complete story cannot be told without reference to fiscal and monetary policy, oil shocks, strikes, and so on–but most of it can.

Suggested Citation

  • John Harvey, 2010. "The US Business Cycle Since 1950: A Post Keynesian Explanation," Working Papers 201005, Texas Christian University, Department of Economics.
  • Handle: RePEc:tcu:wpaper:201005
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    File URL: http://www.econ.tcu.edu/RePEc/tcu/wpaper/wp10-05.pdf
    File Function: First version, 2010
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    More about this item

    Keywords

    business cycle; Keynes; Post Keynesian;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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