 Tendency to Equilibrium, the Possibility of Crisis, and the History of Business Cycle TheoriesHistory of Economic Ideas, 2006, vol. 14, issue 2, 53-104 Abstract: In 1926 Adolf Löwe suggested that business cycle theories are fundamentally incompatible with the idea that the system tends towards equilibrium. Hayek, his disagreement with such a conclusion notwithstanding, recognised that the issue is central to business cycle theorizing, and agreed with Löwe that the proper way to classify business cycle theories is to examine how writers stand on this point. This paper is a preliminary attempt to take Hayek and Löwe seriously on this historiographical issue. After Löwe’s and Hayek’s positions are examined in context, the paper shows that Löwe’s problem had been, implicitly or explicitly, at the heart of theoretical treatment since the early debates on crises. Next, the paper discusses how some crises and cycle theorists gradually switched from considering a stationary equilibrium as a theoretical norm to the idea of cyclical fluctuations as the natural state of the system, while others continued to focus on a stable equilibrium and explained movement as the result of exogenous events, frictions or mismanagements. Finally, the merits of Löwe’s and Hayek’s suggestions are examined in light of this dichotomy. Date: 2006 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hid:journl:v:14:y:2006:2:3:p:53-104 Access Statistics for this article History of Economic Ideas is currently edited by Riccardo Faucci, Nicola Giocoli, Roberto Marchionatti More articles in History of Economic Ideas from Fabrizio Serra Editore, Pisa - Roma |
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