A REVIEW OF PRE-KEYNESIAN NEOCLASSICAL BUSINESS CYCLE THEORY

ABSTRACT

Although some practicing economists believe there was no macroeconomics before Keynes, historians of economic thought recognize a rich and varied stream of literature on monetary and business cycle theory that predate and form the context for Keynes’s General Theory. Accordingly, the present paper examines many of the popular Neoclassical business cycle theories developed prior to the Keynesian Revolution. There are several valuable classifications of these theories; however, it is common to sort the writings on business cycles according to the cause attributed. In particular, this paper will follow an early twentieth century convention, using the terms “originating cause” and “self-generating cycle” to describe the various business cycle theories. Originating causes, such as war and weather, keep the business system in a continual state of unbalance. The business responses to those originating causes create a self-generating cycle of recurrent upward and downward movements in economic activity. This paper should prove useful to teachers (and students) of macroeconomics who wish to complement their technical material with a historical perspective.

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