Lowe's and Hayek's influence on Harrod's trade cycle theory

Daniele Besomi

The European Journal of the History of Economic Thought, 2002, vol. 9, issue 1, 42-56

Abstract: In 1926 Adolph Lowe pointed out that a system in a state of equilibrium is not capable of undergoing any change, and concluded that trade cycles cannot be explained within the framework of static analysis. Harrod seems to have become acquainted with this argument via Hayek's Monetary Theory and the Trade Cycle, where it was expressed in a weaker form. Harrod developed it into his instability principle, maintaining that a correct (endogenous) explanation of the cycle requires that the system is unstable. This argument preceded the actual elaboration of Harrod's cycles and growth mechanism, of which it provides the epistemic foundation.

Keywords: Instability Principle; Business Cycle; Harrod; Lowe; Hayek; Equilibrium (search for similar items in EconPapers)
Date: 2002
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DOI: 10.1080/09672560110103379

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