Marrying Economics with History

Abstract

and trade of about 25 to 30 years are followed by periods of slow or stagnating growth of analogous duration. Similar movements also appear in prices and other monetary variables. The regularity of these ups and downs is accompanied by intense structural change. However, economists are deeply divided on the nature and interpretation of the phenomenon, and for many of them, this is a matter that has still not been settled. The classical roots of the long-wave theoryGrowth, and its uneven unfolding, was one of the main concerns of classical economists (Smith, Ricardo, Malthus, Marx), but the long-term oscillatory pattern of prices and output also attracted the attention of some of the founders of marginalism, such as W. S. Jevons (who in 1884 analyzed the long-term fluctuations in prices) and J. B. Clark. They were joined by other exponents of the marginalist school (particularly, in 1913, Pareto, Bresciani Turroni, Aftalion) so that, at the beginning of the twentieth century, there was a consensus among economists on the reality of what was later called the long wave.However, the gradual ascendancy of neoclassical theory, culminating with the model of general equilibrium, diverted attention from growth and its irregularities and, when the theory of growth returned to the forefront of interest in the 1950s, the focus was on conditions for regular growth (the "steady state"). The business cycle was not ignored, but it was treated within the conceptual framework of equilibrium, on the basis of the "rocking horse" metaphor. According to this metaphor, the economic system tends spontaneously to equilibrium. Cycles are exogenous perturbations produced by random shocks (impulse generation) that trigger an endogenous propagation mechanism with stabilizing properties. This provides the rationale for separating growth and fluctuations, that is, for decomposing the movement of an economic system into trend and cycle. Trend is conceived as the loci of equilibria, a moving center of gravitation, while cycle is restricted to the analysis of the stochastic error term of series and to the properties of the equilibration mechanism.The long-wave theory, also known as Kondratiev's long cycles, sprang from the classical approach, particularly from Marxian analysis that, with its focus on the general laws governing capitalism in the long run, provided a fertile ground for its appearance. Thus, it is not by chance that the pioneers (Parvus [1901(Parvus [ ] 1999van Gelderen 1913;de Wolff [1924de Wolff [ ] 1999 belonged to such a school. However, although the long-wave phenomenon was already acknowledged in the nineteenth century, Kondratiev amassed the first substantial empirical evidence in 1925. On the causes of the "long cycle," Kondratiev's contribution was rather weak; Schumpeter, in his Business Cycles, filled the gap in 1939. The systematic explanation he gave is based on technological revolutions and their diffusion. Radical process and product innovations, noted Schumpeter, do not appear at random, but they bring together a b...