The Trade Cycles: Theory and Evidence has been a central feature of the history of capitalist economies; it is in’ the context of this experience that most of our knowledge of stabilisation policies has been developed; and the forecasts, made a few years ago, of the obsolescence of the cycle look rather dated in their optimism.
My main reason for writing Trade Cycles: Theory and Evidence is that much important work has been done in the last fifteen years, particularly on econometric models and on monetary factors in the cycle, which needs to be brought to the attention of a wider audience. But I have also two more general reasons.
First, even third-year students in economics seem remarkably ignorant of dynamics; in Chapter 2 of this book I attempt to give an account of some standard macro-dynamic models which is reasonably simple without being grossly fallacious.
Second, I hope that some students who regard applied and theoretical macro-economics as two quite distinct and unrelated subjects will be moved by this book to see the error of their ways.
Trade cycle textbooks in the 1950s tended to devote several chapters to national income accounting, consumption functions, and other topics now well treated in dozens of general textbooks on macro-economics.
I have perhaps gone to the other extreme in eschewing ‘general macro’ subjects. The reader should note in particular that Chapter 5 discusses monetarism and its critics only in so far as the controversy is relevant to trade cycles.
The main economic prerequisite for reading this book is a basic grounding in macro-economics at about the level of D. C. Rowan’s Output Inflation and Growth (Macmillan, 1968; 2nd edn 1974) – in other words, slightly beyond the usual British first-year university course, but not much.
The only mathematical prerequisites are simple algebra, the ability to handle inequalities, and patience. Chapter 2 states without proof, and explains, the relevant results on difference equations. Complex numbers and differential equations are not explicitly used. Some small knowledge of probability and statistics will be helpful for Chapter 4.