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From: ritter@spp1.UUCP (Phillip A. Ritter)
Newsgroups: net.politics.theory
Subject: Re: Business Cycles -- Note to Gadfly
Message-ID: <196@spp1.UUCP>
Date: Thu, 9-May-85 19:39:23 EDT
Article-I.D.: spp1.196
Posted: Thu May  9 19:39:23 1985
Date-Received: Sun, 12-May-85 11:25:05 EDT
References: <1146@ratex.UUCP>
Reply-To: ritter@spp1.UUCP (Phillip A. Ritter)
Organization: TRW, Redondo Beach  CA
Lines: 62

In article <1146@ratex.UUCP> mck@ratex.UUCP (Daniel Kian Mc Kiernan) writes:
>
>Comment of Gadfly:
>>[...] Capitalism has its strong points, but the misery brought
>>about by boom-and-bust overproduction is not one of them.
>
>Business cycles are indeed not a strong point of Capitalism; nor are they a
>weak point.  They are, in fact, not a point of Capitalism at all, but rather
>of government manipulation of the money supply which distorts patterns of
>savings and investment.
>
>                               Back later,
>                               DKMcK

I admit that my knowledge of economic theory is limited, but I think that
it is pretty clear that government manipulation of the money supply is
NOT the cause, but rather they are a natural occurance.

The reason I think that DKMcK believes that they are a result of government
manipulation is that most of the governments attempts to smooth them tend to
make them worse - the government tends to be re-active where any attempt to
smooth business cycles REQUIRES predictive behavior.

Phil Ritter

For reference:

One of the things that Marx was so upset about was (after explotation of
workers) the Business cycles in capitalistic systems.  He really beleived that
his ideal society would not be subject to them.

In the late 1920's, however, an economist name Kondratiev, working for the
Soviet Union, studied one special type of business cycle, the so called
``50 year'' or ``long'' business cycles, in theoretical socialist and marxist
systems.  Needless to say, when he determined that business cycles would not
only still exist, but be worse(!) in both cases, he recieved a very long
fellowship to study the effects of hard labor in a cold climate!  His work was
almost lost (supressed?).  [FYI - these ``long'' business cycles are now
generally known as ``Kondratiev business cycles'']

In the late 1930's, a western economist named Schumpeter picked up on some
of Kondratiev's work as one part of a book he published (unfortunately, I can't
remember the name).  However, his work was published by an obscure publisher,
written in a very hard to read style, and about one year after the work by
Keynes, and thus leading to very little ``exposure'' for his theories.
Schumpeter makes some very interesting arguments to explain the business
cycles (especially the long cycles studied by Kondratiev) and some methods
of dealing with them by attacking the causes (unlike Keynes, who simply
proposes a way to attack the symptoms of business cycles).

Marx claims business cycles exist in capitalistic systems.
Kondratiev claims Marx's proposed systems don't eliminate them.
Schumpeter, using the work of Marx and Kondratiev (and others) gives very
convincing arguments that business cycles simply exist, government meddling
and particular economic system notwithstanding.

I suggest to anyone, marxist, socialist, capitalist, or other, to study both
the works of Kondratiev and Schumpeter (even if you don't agree with everything
they say, they are all interesting).  They both add interesting insight into
most other treatments of economics.
-- 
Phillip A. Ritter