Let's face it, humanity has a lousy definition, accompanying practice, and analysis of peace.
Previously, we entered into the realm of discussing the cycles of engines of which the two and four-stroke versions are widely used. In this installment we will start with an introduction to the (biological) circadian cycle, or rhythm because of its relationship to the two-part(?) light/dark sequence in as much as we may align such terms with peace/war or some other such dichotomy as good/bad. However, it is of need to distinguish between Circadian and Biological rhythms and bring to the fore the acknowledgement of cognitive rhythms which are all too apparent as can be deduced by repeating historical events... one of which is the "cycle" of peace and war... as if it were a type of Seasonal Affective Disorder (SAD).
(Circadian rhythm refers to) the cyclical 24-hour period of human biological activity.
Within the circadian (24-hour) cycle, a person usually sleeps approximately 8 hours and is awake 16. During the wakeful hours, mental and physical functions are most active and tissue cell growth increases. During sleep, voluntary muscle activities nearly disappear and there is a decrease in metabolic rate, respiration, heart rate, body temperature, and blood pressure. The activity of the digestive system increases during the resting period, but that of the urinary system decreases. Hormones secreted by the body, such as the stimulant epinephrine (adrenaline), are released in maximal amounts about two hours before awakening so that the body is prepared for activity.
The circadian cycle is controlled by a region of the brain known as the hypothalamus, which is the master centre for integrating rhythmic information and establishing sleep patterns. A part of the hypothalamus called the suprachiasmatic nucleus (SCN) receives signals about light and dark from the retina of the eye. Upon activation by light, special photoreceptor cells in the retina transmit signals to the SCN via neurons of the retinohypothalamic tract. The signals are further transmitted to the pineal gland, a small cone-shaped structure that is attached to the posterior end (behind the hypothalamus) of the third cerebral ventricle and that is responsible for the production of a hormone called melatonin. Cyclical fluctuations of melatonin are vital for maintaining a normal circadian rhythm. When the retina detects light, melatonin production is inhibited and wakefulness ensues; light wavelength (colour) and intensity are important factors affecting the extent to which melatonin production is inhibited. In contrast, in response to darkness, melatonin production is increased, and the body begins to prepare for sleep. Sleep-inducing reactions, such as decreases in body temperature and blood pressure, are generated when melatonin binds to receptors in the SCN.
The natural time signal for the circadian pattern is the change from darkness to light. Where daylight patterns are not consistent, as in outer space, regimented cycles are established to simulate the 24-hour day. If one tries to break the circadian rhythm by ignoring sleep for a number of days, psychological disorders begin to arise. The human body can learn to function in cycles ranging between 18 and 28 hours, but any variance greater or less than this usually causes the body to revert to a 24-hour cycle. Even in totally lighted areas such as the subpolar twilight zone, the body has regular cycles of sleep and wakefulness once the initial adjustment has been made.
Any drastic shift in the circadian cycle requires a certain period for readjustment. Each individual reacts to these changes differently. Travel across a number of time zones is commonly accompanied by circadian rhythm stress, sometimes called "jet lag." For example, jet travel between Tokyo and New York City creates a time difference of 10 hours; it usually takes several days for the body to readjust to the new day-night pattern. Too-frequent shifts in circadian patterns, such as several transoceanic flights a month, can lead to mental and physical fatigue. Preflight or postflight adaptation can be achieved by gradually changing one's sleeping patterns to simulate those that will be necessary in the new environment. Space travel is even more extreme. Astronauts first encounter rapid changes in the day-night cycle while in Earth's orbit. Beyond this, the void becomes a constant blackness with no observable distinction between daytime and nighttime.
The circadian cycle can alter the effectiveness of some drugs. For example, the timing of administration of hormonal drugs so as to be in accord with their natural circadian production pattern seems to place less stress on the body and produce more effective medical results.Source: "Circadian Rhythm." Encyclopædia Britannica Ultimate Reference Suite, 2013.
(A biologial rhythm is a) periodic biological fluctuation in an organism that corresponds to, and is in response to, periodic environmental change. Examples of such change include cyclical variations in the relative position of the Earth to the Sun and to the Moon and in the immediate effects of such variations, e.g., day alternating with night, high tide alternating with low tide.
The internal mechanism by which such a rhythmic phenomenon occurs and is maintained even in the absence of the apparent environmental stimulus is termed a biological clock. When an animal that functions according to such a clock is rapidly translocated to a geographic point where the environmental cycle is no longer synchronous with the animal's cycle, the clock continues for a time to function synchronously with the original environmental cycle. Humans similarly transported over great distances often experience fatigue and lowered efficiency for several days, a phenomenon known as "jet lag," or jet syndrome.
A rhythm with a 24-hour cycle is called a circadian (from Latin circa, "about"; di, "day"—i.e., "about a day"), solar day, diel, daily, diurnal, or nychthemeral rhythm. A lunar tidal rhythm—the regular ebb and flow of oceans and very large inland bodies of water-subjects seashore plants and animals to a rhythmic change; typically two high and two low tides occur each day (about 24.8 hours). Many species of shorebirds exhibit this rhythm by seeking food only when beaches are exposed at low tide. Monthly rhythms, averaging approximately 29.5 days, are reflected in reproductive cycles of many marine plants and in those of many animals. Annual rhythms are reflected in the reproduction and growth of most terrestrial plants and animals in the temperate zones.Source: "Biological Rhythm." Encyclopædia Britannica Ultimate Reference Suite, 2013.
Seasonal Affective Disorder (SAD)
(Seasonal Affective Disorder is a) mood disorder characterized by recurring depression in autumn and winter, separated by periods of nondepression in spring and summer. The condition was first described in 1984 by American psychiatrist Norman Rosenthal.
In autumn, when the days grow progressively shorter, resulting in an increase in the number of hours spent in darkness, people susceptible to SAD develop atypical depressive symptoms. These symptoms generally include difficulty waking up in the morning; a tendency to oversleep, to overeat, and to gain weight; a craving for carbohydrate-rich foods, such as sweets and breads; fatigue and decreased energy, especially in the afternoon hours; difficulty concentrating and accomplishing tasks; and withdrawal from friends, family, and social activities. Along with this predictable cluster of symptoms, people with SAD also become depressed, pessimistic, and unable to enjoy the things that usually give them pleasure.
When spring comes, these symptoms generally resolve, and people with SAD feel well again. In fact, some people with SAD become euphoric during the summer. They may experience a condition known as hypomania, in which they have rapid thoughts and speech, have grandiose ideas about themselves, or become short-tempered, irritable, and impulsive. If these symptoms become severe, affected individuals may show bad judgment and behave recklessly—characteristics of a condition described as mania. People with SAD may suffer from recurring major depressive disorder, with severe depression in winter and normal mood in spring and summer, or from bipolar disorder, with depression in winter and hypomania or mania in spring and summer. Variants of SAD include a milder form, commonly known as the "winter blues," and a condition of chronic depression with winter exacerbations. There is also a condition of regular summer depressions, called reverse SAD (or summer SAD), which is less common and less well understood than the winter variety.
The condition is a common illness in regions distant from the Equator, which experience dramatic shifts in length of daylight between summer and winter. SAD is estimated to affect approximately 5 percent of people in the United States and between 4 and 14 percent of people in Europe, depending on latitude. The condition is far less common in China and Japan. Women are more likely than men to develop SAD, especially during their reproductive years. This suggests that female sex hormones may play a role in sensitizing the brain to changes in environmental light. Children and adolescents also may be affected.
In addition to lack of light, other factors that predispose an individual to SAD include biological vulnerability (e.g., being female) and stress. Levels of the hormone melatonin and the brain neurotransmitter serotonin vary across the seasons and affect circadian rhythm. Shifts in circadian rhythms can lead to stress, which is frequently associated with waking up early in the morning. Stress from the demands associated with managing a family and with work can elicit symptoms in vulnerable people. In addition, SAD tends to occur in individuals who have an affected family member, and several genes have been identified that may contribute to the development of the condition. However, more research is needed to understand the genetic link to SAD.
The primary treatment for SAD is light therapy, which involves exposing the affected person to bright light, usually from a fixture called a light box. Fluorescent light tubes placed behind a screen that filters out potentially harmful ultraviolet rays are commonly used. Fixtures using light-emitting diodes also may be effective, though they have not been tested extensively. The duration of light therapy required depends on the individual, the geographical region, and the time of year. Mornings are usually the best time for light therapy, though it may provide beneficial effects at any time of the day. Other treatments include exercise, especially in a brightly illuminated setting, antidepressant medications, and cognitive behaviour therapy. Treatments started early in autumn may prevent the development of winter symptoms in susceptible individuals.Norman Rosenthal: Psychiatrist and medical director of Capital Clinical Research Associates (CCRA).
Whereas we can find discussions on circadian, biological, sleep, poetry, music and business cycles (rhythms/patterns), there is a stark absence of any direct discussion about cognitive rhythms, patterns, cycles, etc... Even though the off again, on again cyclicity of war and peace is a definite cycle, the fact that it may be related to an environmentally influenced cyclicity is ignored and may even be attacked because the conventional means by which we define a cycle, a pattern, or a rhythm is used to refute the notion... or that the conventionality of our recurring methodology for making a determination of what a cycle or pattern or rhythm is... also is a cycle, a pattern, and a rhythm itself.
The identification of ideas from different subject areas utilizing basic patterns which are numerically discernible— though the labels employed may be words from a distinct vocabulary which might be called an idiom, jargon or vernacular; represents a type of cognitive rhythm which may be but a fluctuation of a larger rhythm. For example, while we have the physics idea of there being three large atomic particles (protons- neutrons- electrons) and these have three quarks and three anti-quarks... how can we be certain that they actually exist in this "three" configuration if the environment influences to have a brain directed towards seeing (and thus verifying) the sub-atomic world in this pattern? And because we can recognize the presence of ideas portraying 1, 2, 3 configurations (developmental 1,2,3 Germ Layers, Monism-Duality-Triplicity in philosophy, Grade school- Middle/Jr. High- High school, small-medium-large/X large- XX large- XXX large, etc...), is not this a recurring pattern of mental activity that may have its initial influence in the environment... and/or that our physiology (and the physiology of other life forms) is predisposed to?
And it matters not if an idea has been discounted due to some error. The fact remains is that it was produced in the first place. No less, that when we take stock of all our ideas... there is the presence of a limitation... a conservation. In other words, we don't use street lights with one-hundred colors, we use three. Nor do we humans create different forms of consumable alcohol... since they are all classified as being either beer, wine, or ("hard") liquor. And as for smoking, there exists another three known as cigars, cigarettes, pipes. Use of patterns-of-one, two, three, etc., regardless of what words, symbols or embellishments are employed in what context; they are recurrences of cognitive patterns which can be described as a rhythm... just like exercising on three days of the week, eating one, two, or three meals a day, working 4, 6, 8, 10, 12 or more hours per day, etc...
One of the problems encountered in the analysis of human behavior is the inclination for some to think that they are being observed in a personal and subjective context instead of an impersonal and (hopefully) objective manner. Thus researchers whose information comes from diverse sources may find themselves confronted by those who do not think their belief is a cognitive pattern seen in other beliefs because they view their ideas as being something special and some other ideas as being worthless. For example, in pointing out the three "8's" (888) as a reference to Jesus (Examples of threes in religion page 2) and the three "6's" as a reference to the devil (and is not merely an "anti-Christ" symbol to be dominated by the Christian religion), and that Hitler's three 5's (555) (Nazi party membership number) reference; a person who holds that one particular reference is more important than the others may be disinclined to see all of them as different variations of the same type of cognitive pattern.
With respect to thinking, we have sub-normal, normal, and super-normal; coupled with those ascribing some variation in-between. We also have the insane, sane and "super-sane" which can be deduced from the idea that some forms of so-called mental illness are defensive measures to protect a person from an otherwise hostile social environment that can not readily appreciate their world-view which does not regurgitate the same cognitive rhytms called for in most social settings, including those whose members may think of themselves as being "open-minded" which actually means conformity to think about creativity and originality of thought in socially accepted conventionalisms. It is a perspective that Ronnie D. Laing might well agree with since it is he who promoted the idea of "Super-sanity" as a reference to some mental patients. However, let us not fail to include a reference about Socrates who was forced to choose to drink hemlock because many of those in authority during his time went along with those in the public who thought he was corrupting the young with his strange ideas.(See: Super-Sanity and Cenocracy)
It should be understood that attempts at distinguishing "cognitive rhythms" have been attempted and are viewed by many people as a given in that they recognize recurrences of thought in individuals or groups. Because money or other resources are often of primary importance to some, an attempt to devise a means of analyzing business trends such as stock market data with an intent to discover some pattern that can be utilized to make a fortune off of it, has been attempted by various people interested in economics. In one instance, such as in the case of the ideas espoused in the "Thinking, Fast and Slow" (2011) book by Daniel Kahneman, where the old "dual process theory" from psychology was applied to the double-entry orientation of business; an attempt was made to combine psychology with economics to produce a money generating business model of understanding human behavior in terms of consumerism. Whereas money can be made in any system if people believe in it, the problem with the theory is that it is wholly deficient in understanding human cognition because it displays a preference for "two-patterned" thinking without having identified the existence of the "three", the one-two-three, the three -to- one ratio, and of course, the overall conservation of human cognition occurring in an environment expressing an incrementally progressive deterioration.(See: Let's Talk Peace 18)
Let us look at a discussion about business cycles, remembering to think in terms of cognitive cycles and interjecting the words peace and war so as to keep in mind respective correlations to be made. And let us also make a mental note that if we let economic thinking remain in a "two"- patterned frame of mind that resorts to solidifying its position by accumulating supposed "evidence" from other subject areas such as psychology (which is steeped in a "two-patterned" orientation [see: Let's Talk Peace 6]) It must also be understood that "thinking in threes" is a development that appears to have come after a long history of "thinking in twos", with a future that appears oriented towards utilizing a three -to- one ratio involving a fusion. There is a cycle in thinking just as there is a cycle in biological development... and yet the cycle is being altered by an incremental deterioration in the environment... like a square wheel that is having its edges re-shaped, thereby concealing its former shape because history and memory are faulty in recall and illustration; though our biology is presenting us with a crude sketch thereof.
Please note that there is the intimation of an "uncertainty principle" that is advanced and used as a means not to discredit a given analysis... though other words and arguments are put forward as well as "face saving" gestures. Ideas procured from Physics is one of the models adopted, though one might include Sociology models, Psychology models, Mathematical models, Biological models, etc... Let the reader also pay witness to the "threes" references and the remark about limitations regarding the up and down swings of the market/economics pendulum... thus citing a conservation, but does not describe the momentum of the swing being dependent on and influenced by overall planetary deteriorations taking place on an incremental basis.
(A business cycle refers to) periodic fluctuations in the general rate of economic activity, as measured by the levels of employment, prices, and production. Figure 1, for example, shows changes in wholesale prices in four Western industrialized countries over the period from 1790 to 1940. As can be seen, the movements are not, strictly speaking, cyclic, and although some regularities are apparent, they are not exactly wavelike. For these reasons, some economists prefer the term business fluctuation over business cycle.
There are many types of economic fluctuation. Because of the complexity of economic phenomena, it may be that there are as many types of fluctuation or cycle as there are economic variables. There are daily cycles in commuter traffic or the consumption of electricity, to cite only two examples. Almost every aspect of economic life displays seasonal variations: sales of coal or ice, deposits in savings banks, monetary circulation, agricultural production, purchases of clothing, travel, housing, entertainment, and so on. As one lengthens the span of observation, one finds new kinds of fluctuation, such as the hog cycle and the wheat cycle, the inventory cycle, and the construction cycle. Finally, there are movements of general economic activity that extend over periods of years.
Statistical studies of cycles
Modern economic history has recorded a number of periods of difficult times, often called depressions, during which the business economy was marked by sudden stock market declines, commercial bankruptcies, bank failures, and mounting unemployment. Such crises were once looked upon as pathological incidents or catastrophes in economic life, rather than as a normal part of it. The notion of a "cycle" implies a different view. The following examples represent some of the attempts theorists have made to explain and predict business cycles.
The Juglar cycle
The first authority to explore economic cycles as periodically recurring phenomena was the French physician and statistician Clément Juglar, who in 1860 identified cycles based on a periodicity of roughly 8 to 11 years. Scholars who developed Juglar's approach further distinguished three phases, or periods, of a typical cycle: prosperity, crisis, and liquidation. Subsequent analysis designated the years 1825, 1836, 1847, 1857, 1866, 1873, 1882, 1890, 1900, 1907, 1913, 1920, and 1929 as initial years of a downswing (i.e., the beginning of the "crisis" phase).
The so-called Juglar cycle has often been regarded as the true, or major, economic cycle, but several smaller cycles have also been identified. Close study of the interval between the peaks of the Juglar cycle suggests that partial setbacks occur during the expansion, or upswing, and that there are partial recoveries during the contraction, or downswing. According to this theory, the smaller cycles generally coincide with changes in business inventories, lasting an average of 40 months. Other small cycles result from changes in the demand for and supply of particular agricultural products such as hogs, cotton, and beef.
Cycles of greater duration than the Juglar cycle have also been studied. For example, the construction industry was found to have cycles of 17 to 18 years in the United States and 20 to 22 years in England. Measuring longer-term business cycles involves the study of long waves, or so-called Kondratieff cycles, which were named for the Russian economist Nikolay D. Kondratyev. His examination of the major Western countries during the 150 years from 1790 to 1940 identified three periods characterized by slow expansions and contractions of economic activity, each averaging 50 years in length:
Only these three Kondratieff waves have been observed. Some students of business cycles have analyzed them by statistical methods, in the hope of finding regularities that are not immediately apparent. One speculative theory has held that the larger cycles were built up from smaller ones. Thus, two seasonal cycles would produce a two-year cycle, two of which would produce a four-year cycle; two four-year cycles would become an eight-year, or Juglar, cycle, and so on. The hypothesis is not widely accepted.
Patterns of economic depression and upswing
Cycles of varying lengths are closely bound up with economic growth. In 19th-century Germany, for example, upswings in total economic activity were associated with the growth of the railroad, metallurgy, textile, and building industries. Periodic crises (such as those outlined above in the discussion of the Juglar cycle) brought slowdowns in growth. The crisis of 1873 led to a wave of financial and industrial bankruptcies; recovery started in 1877, when iron production ceased to fall, and by 1880 a new upswing was under way. The recession of 1882 was less severe than the previous one, but a slump that began in 1890 led to a serious depression, with complaints of overproduction.
The year 1890 was one of financial crisis also in England and the United States. The British banking house of Baring Brothers failed, partly because of a revolution in Argentina. English pig-iron production fell from 8.3 million tons in 1889 to 6.7 million tons in 1892, and unemployment increased. That depression might have been less severe but for the international financial crisis, especially intense in the United States, where in 1893 a stock market panic led to widespread bank failures.
The recession of 1900 was followed by an unusually vigorous upsurge in almost all the Western economies. U.S. pig-iron production increased by more than 150 percent during the expansion, which lasted until 1907; building permits more than doubled; and freight traffic rose by more than 50 percent. Prices rose more and more rapidly as the U.S. economy approached full employment.
Deviations from cycle patterns
Cycles are compounded of many elements. Historical fluctuations in economic activity cannot be explained entirely in terms of combinations of cycles and subcycles; there is always some factor left over, some element that does not fit the pattern of other fluctuations. It is possible, for example, to analyze a particular fluctuation into three principal components: a long component or trend; a very short, seasonal component; and an intermediate component, or Juglar cycle. But these components cannot be found exactly recombined in another fluctuation because of a residual element in the original fluctuation that does not have a cyclical form. If the residual is small, it might be attributed to errors of calculation or of measurement. On a more sophisticated statistical level, a residual element can be treated as "random movement." If the random element is always present, it becomes an essential element of the analysis to be dealt with in terms of probability.
For practical purposes, it would be useful to know the typical shape of a cycle and how to recognize its peak and trough. A great amount of work has been done in what may be called the morphology of cycles. In the United States, Arthur F. Burns and Wesley C. Mitchell based such studies on the assumption that at any specific time there are as many cycles as there are forms of economic activity or variables to be studied, and they tried to measure these in relation to a "reference cycle," which they artificially constructed as a standard of comparison. The object in such studies was to describe the shape of each specific cycle, to analyze its phases, to measure its duration and velocity, and to measure the amplitude or size of the cycle.
In studying various cycles, it has been possible to construct "lead and lag indicators"—that is, statistical series with cyclical turning points consistently leading or lagging behind the turns in general business activity. Researchers using these methods have identified a number of series, each of which reaches its turning point 2 to 10 months before the turns in general business activity, as well as another group of series, each of which follows the turns in business by 2 to 7 months. Examples of leading series include published data for new business orders, labour productivity, consumer demand, residential building contracts, stock market indices, and changes in business inventory. These and other leading indicators are widely used in economic forecasting.
Dynamic analyses of cycles
Coincident with the Great Depression—one of the most severe economic downturns in modern times—the British economist John Maynard Keynes put forth a large body of economic theory that examined the relationship between investment and consumption. According to Keynes and other economists associated with his views, any new expenditure—e.g., on building a road or a factory—generates several times as much income as the expenditure itself. This is so because those who are paid to build the road or factory will spend more of what they receive; their expenditures will thus become income for others, who will in their turn spend most of what they receive. Every new act of investment will, thus, have a stimulating effect on aggregate income. This relationship is known as the investment multiplier. Of itself, it cannot produce cyclical movements in the economy; it merely provides a positive impulse in an upward direction.
To the relationship between investment and consumption must be added that between consumer demand and investment. An increase in demand for refrigerators, for example, may eventually require increased investment in the facilities for producing them. This relationship, known as the accelerator, implies that an increase in national income will stimulate investment. As with the multiplier, it cannot of itself explain cyclical movements; it merely accounts for a fundamental instability that Keynesians thought they had observed.
It can be shown, however, that the multiplier and accelerator in combination may produce very strong cyclical movements. Thus, when an increase in investment occurs, it raises income by some larger amount, depending on the value of the multiplier. That increase in income may in turn induce a further increase in investment. The new investment will stimulate a further multiplier process, producing additional income and investment. In theory, the interaction might continue until a point is reached at which such resources as labour and capital are being fully utilized. At that point—with no increase in employment and, therefore, no rise in consumer demand—the operation of the accelerator would cease. That halt in demand, plus the lack of new capital, would cause new investment to decline and workers to be laid off. The process thus would go into reverse. The fluctuations in national income could take various forms, depending on the characteristics of the economy and the way in which the population allocated its income between consumption and savings. Such spending habits, of course, affect both the levels of consumer demand and capital investment. This theoretical analysis does not explain actual economic fluctuations; it is merely an aid to understanding them.
The analysis can be made more realistic by taking into account three other factors. First, one may assume that although the economy has an inherent tendency to swing very widely, there are limits beyond which it cannot go. The upper limit of the swings would be the point at which full employment or full capacity is reached; the lower limit is more difficult to define, but it would be established when the forces that make for long-term economic growth begin to operate. Thus, the upswing of a cycle stops when it meets the upper limit; and the downswing stops at the lower limit, resulting in continuous cyclical movements with an overall upward trend—a pattern corresponding to the one found in history.
The occurrence of a time lag—the inevitable delay between every decision to invest and the outcome of that investment—provides a second reason for expecting cyclical fluctuations to occur in any economic process. This phenomenon is illustrated, for example, in the relation between the action of a thermostat and the temperature of a room. A fall in room temperature causes the thermostat to turn on the heater, but there is a lag in time until the room warms up sufficiently to cause the thermostat to turn the heat off, whereupon the temperature begins to fall again. The shape of the curve of the temperature cycle will depend on the responsiveness of the thermostat and on the time required to raise the temperature of the room. By making various adjustments, it is possible to minimize the cycle, but it can never be eliminated entirely.
In economic life, there are many such lags between the decision to invest and the completion of the project: between the farmer's decision to raise hogs and the arrival of pork chops at the store, for example, or between prices at the time of a decision and prices at the time the transaction is completed.
Random shocks, or what economists call exogenous factors, constitute the third type of phenomena affecting business cycles. These are such external disturbances to the system as weather changes, unexpected discoveries, political changes, wars, and so on. It is possible for such external impulses to cause cyclical motions within the system, in much the same way that striking a rocking horse with a stick will cause the horse to rock back and forth. The length of the cycle will be determined by the internal relationships of the system, but its intensity is governed by the external impulse.
Theories of economic fluctuation
Many explanations of the reasons for economic fluctuation have been advanced throughout history. Even the most rudimentary explanation of cycles must isolate the forces and relationships that tend to produce these recurrent movements. The more comprehensive theories must in addition explain why, during downturns, (1) employment falls and unemployment increases and (2) investment declines by a much greater percent than output.
Agricultural and climatic theories
Perhaps the oldest theories of the business cycle are those that link their cause to fluctuations of the harvest. Since crops depend upon soil, climate, and other natural factors that in turn may be affected by biological or meteorological cycles, such cycles will transmit their effects through the harvests to the rest of the economy. The 19th-century British economist William Stanley Jevons thought he had found the key to such a process in the behaviour of sunspots, which seemed to display a 10-year cycle. His naïve explanation could not long withstand critical examination. It attracted a certain interest, however, for suggesting a causal factor that was completely detached from the economic system and one that could not be influenced by it in turn. Agricultural theories made sense in the 19th century and earlier, when agricultural products represented between 40 and 60 percent of the output of advanced economies. By the turn of the 21st century, however, agriculture's contribution to the outputs of advanced economies had fallen to 5 percent or less.
A number of writers have explored mass psychology and its consequences for economic behaviour. Individuals are strongly influenced by the beliefs of the group or groups to which they belong. There are times when the general mood is optimistic and others when it is pessimistic. British economist Arthur C. Pigou, in his Industrial Fluctuations (1927), put forward a theory of what he called "noncompensated errors." He pointed out that, if individuals behave in a completely autonomous way, their errors in expectations will tend to offset each other. But if they imitate each other, their errors will accumulate, eventually acquiring a global magnitude that may have powerful economic effects. This "follow-the-crowd" tendency is a factor in the ups and downs of the stock market, in financial booms and crashes, and in the behaviour of investors. One can say, however, that this psychological factor is not enough to explain economic fluctuations; rather, moods of optimism and pessimism themselves are probably rooted in economic factors.
Some observers have maintained that economic fluctuations result from political events. Even the imposition of a tax or an import restriction may have some dynamic effect upon the economy. In the United States, for example, some economists have speculated that incumbent political leaders pressure the chairman of the Federal Reserve System to loosen monetary policy in advance of an election as a means of fostering prosperity. It remains to be determined whether such political factors are capable of producing cyclical movements.
Ever since the start of the Industrial Revolution at the end of the 18th century, technical innovations have followed each other without end but not without pause. For example, cycles of rapid growth and measured accommodation took place after the introduction of the steam engine, the development of petroleum-based energy sources, the harnessing of electric power, and the invention of the computer and the creation of the Internet. It is possible that, if a rhythm could be found in these waves of change, the same rhythm might be responsible for corresponding movements in the economy. But it is equally possible that the technical innovations themselves have been dictated by the prior needs of the economy.
Even changes in population have been postulated as a cause of economic fluctuations. There are, undeniably, cyclical movements of population; it is possible to find fluctuations in the rates of marriage, birth, mortality, and migration, but the extent to which such fluctuations may be associated with changes in economic conditions is not clear.
In an expanding economy, production tends to grow more rapidly than consumption. The disparity results from the unequal distribution of income: the rich do not consume all their income, while the poor do not have sufficient income to meet their consumption needs. This imbalance between output and sales has led to theories that the business cycle is caused by overproduction or underconsumption. But the basic, underlying cause is society's inadequate provision for an even flow of savings out of the excess of production over consumption. In other words, saving is out of step with the requirements of the economy; it is improperly distributed over time.
The fact that changes in the supply of savings, or loanable funds, are not closely coordinated with changes in the rest of the economy lies at the heart of the theories that link investment imbalance to the business cycle. Savings accumulate when there is no immediate outlet for them in the form of new investment opportunities. When times become more favourable, these savings are invested in new industrial projects, and a wave of investment occurs that sweeps the rest of the economy along with it. The new investment creates new income, which in turn acts as a further stimulus to investment. In 1894 an early observer of this phenomenon, the Russian economist Mikhayl Tugan-Baranovsky, published a study of industrial crises in England in which he maintained that the cycle of investment continues until all capital funds have been used up. Bank credit expands as the cycle progresses. Disproportions then begin to develop among the various branches of production as well as between production and consumption in general. These imbalances lead to a new period of stagnation and depression.
Some writers have ascribed economic fluctuations to the quantity of money in circulation. Changes in the money supply do not always conform to underlying economic changes, and it is not difficult to see how this lack of coordination could produce disturbances in the economic system. Thus, an increase in the total quantity of money could cause an increase in economic activity.
The banking system, with its ability to expand the supply of credit in an economic expansion and to contract the supply of credit in time of recession, may in this way amplify small economic fluctuations into major cycles of prosperity and depression. Theorists such as the Swedish economist Knut Wicksell emphasized the influence of the rate of interest: if the rate fixed by the banking system does not correspond to the "natural" interest rate dictated by the requirements of the economy, the disparity may of itself induce an expansion or contraction in economic activity.
Rational expectations theories
In the early 1970s the American economist Robert Lucas developed what came to be known as the "Lucas critique" of both monetarist and Keynesian theories of the business cycle. Building on rational expectations concepts introduced by the American economist John Muth, Lucas observed that people tend to anticipate the consequences of any change in fiscal policy: they "behave rationally" by adjusting their actions to take advantage of new laws or regulations, inevitably weakening or undermining them. In some cases, these actions are significant enough to offset completely the outcome the government had hoped to achieve.
Although he was criticized for overstating the connection between human behaviour and economic rationalism, Lucas influenced other 20th-century economists who asserted that business fluctuations resulted from underlying changes in the economy. Historically, according to their view, economic fluctuations have been marked by periods of innovation followed by slower periods during which the innovations were absorbed. Business cycles, therefore, serve as adjustments to underlying conditions—adjustments that are necessary if economic growth is to continue.
Since the Great Depression, many governments have implemented anti-cyclical policies designed to offset regular business fluctuations. The increasing complexity and diversification of modern economies, however, have tended to reduce their dependence on any one sector, thereby limiting the possibility of boom-and-bust effects resulting from specific industries.
Good introductions to the study of business cycles include Erik Lundberg (ed.), The Business Cycle in the Post-War World (1955, reprinted 1986); R.C.O. Matthews, The Business Cycle (1959, reissued 1967); Robert Aaron Gordon, Business Fluctuations, 2nd ed. (1961); Alvin Harvey Hansen, Business Cycles and National Income, expanded ed. (1964); and Henri Guitton, Fluctuations et croissance économiques, 3rd ed. (1970). Famous surveys of business-cycle theories are Joseph A. Schumpeter, Business Cycles: A Theoretical, Historical, and Statistical Analysis of the Capitalist Process, 2 vol. (1939, reissued 2006); and Gottfried Haberler, Prosperity and Depression, 5th ed. (1964, reissued 1968). J. Tinbergen, Statistical Testing of Business-Cycle Theories, 2 vol. (1939, reissued 2 vol. in 1, 1968), attempts to verify by econometric analysis the theories surveyed in Haberler's work. The nontheoretical approach to business-cycle research is set forth in Arthur F. Burns and Wesley C. Mitchell, Measuring Business Cycles (1946); and further developed in Geoffrey Hoyt Moore, Business Cycle Indicators, 2 vol. (1961). Important articles are collected in American Economic Association, Readings in Business Cycle Theory (1944, reprinted 1980), and Readings in Business Cycles (1965). History and politics are dealt with in Vivian Walsh and Harvey Gram, Classical and Neoclassical Theories of General Equilibrium; and James E. Alt and Kenneth A. Shepsle (eds.), Perspectives on Positive Political Economy (1990).
The basic principles of macroeconomics, which include cyclical analysis, may be found in any contemporary textbook of economics. Two good introductions to this subject are George T. McCandless, Jr., Macroeconomic Theory (1991), neoclassical in approach; and Joseph Stiglitz, Economics, 4th ed. (2005), Keynesian-oriented. At the intermediate level, two competing alternative theories of national income are presented in Robert J. Barro and Vittorio Grilli, European Macroeconomics (1994), which applies the intertemporal equilibrium approach to macroeconomic analysis; and Rudiger Dornbusch, Stanley Fischer, and Richard Startz, Macroeconomics, 9th ed. (2004), which follows an IS-LM (an economic equilibrium model measuring trade-offs between the market for goods and bonds and the market for money) approach.
More specialized or intensive treatments of macroeconomics are John Maynard Keynes, The General Theory of Employment, Interest, and Money, new ed. (2006), the classic theoretical work in the field; Seymour E. Harris (ed.), The New Economics: Keynes' Influence on Theory and Public Policy (1947, reprinted 1973), a collection of early essays on Keynes and his ideas, representing the thinking of its time; and Gardner Ackley, Macroeconomic Theory (1961; also published as Macroeconomics: Theory and Policy, 1978), an introductory text. Later evaluations by leading economists of the significance and influence of Keynesian ideas may be found in Roy F. Harrod, The Life of John Maynard Keynes (1951, reprinted 1990), offering insight into the genesis of Keynes's ideas; H.G. Johnson, "The General Theory After Twenty-five Years," in The American Economic Review, 51:1-17 (1961), providing a retrospective survey from a monetarist point of view; Robert Lekachman (ed.), Keynes' General Theory: Reports of Three Decades (1964); Axel Leijonhufvud, On Keynesian Economics and the Economics of Keynes (1968, reissued 1973), an interesting but difficult appraisal of the development of Keynesian ideas; and Herbert Stein, The Fiscal Revolution in America, 2nd rev. ed. (1996), examining the relationship between Keynesian thinking and governmental policies in the United States.
Some important perspectives on economic strategies that have resulted in fluctuations are John Kenneth Galbraith, Economics and the Public Purpose (1973, reissued 1975), and Economics in Perspective: A Critical History (1987); Robert E. Lucas, Jr., "Understanding Business Cycles," in Stabilization of the Domestic and International Economy, ed. by K. Brunner and A. Meltzer, vol. 5 of the Carnegie-Rochester Series on Public Policy, Amsterdam, North-Holland, 1977; and Douglass C. North, Institutions, Institutional Change, and Economic Performance (1990).Henri Guitton: Emeritus Professor of Economics, University of Paris I. Editor in Chief, La Revue d'Éonomie Politique.