Trend and Cycle

Steindl, Josef

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Document type:: Works

Collection:: Josef Steindl Collection

Title:: Trend and Cycle

Author:: Steindl, Josef

Scope:: Typoskript, Konvolut aus zwei Versionen von "Trend and Cycle", teilweise identisch, nummeriert, handschriftliche Anmerkungen und Notizen, 10 Blätter und 9 Blätter

Year of publication:: 1988

Source material date:: [vermutlich um/vor 1988]

Language:: English

Note:: Versionen einer Reihe von Entwürfen zu "Trend and Cycle". Die letzte Version wurde post mortem veröffentlicht und vermutlich 1988 verfasst. - Beilage (63 Seiten): Industrial Output Section (Division of Research and Statistics): Capacity Utilization, Manufacturing, Mining, and Utlities and Industrial Materials January 1967-December 1984 with supplementary manufacturing data, January 1948-December 1966. Revised July 1985, Washington D.C.

Topic:: Growth,cycle and stagnation

JEL Classification:: E11 [General Aggregative Models: Marxian, Sraffian, Kaleckian] E32 [Business Fluctuations, Cycles] E37 [Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications]

Shelfmark:: S/M.18.1

Rights of use:: In Copyright

Access:: Free access

DOI:: https://doi.org/10.48671/nls.js.AC14446050

2 The trend is a slow movement,non-reversible, and the underlying type of behaviour is based on long run perspectives ("long run expectations 0 ) and perhaps also on long run memory. The cycle is a relatively quick movement,reversible,based on short run memory (current or rather recent experience) and, it seems implied, short run perspectives. ( Short run in this context refers to events within the course of a single business cycle,while long run goes beyond the experience of a cycle). Once these intuitive interpretations are accepted it becomes rather puzzling that many authors from Aftalion to Frisch and Kalecki have regarded the trade cycle as essentially produced by fluctuations in fixed capital investment. But we are inclined ,with Keynes,to think of fixed investment as based on a long run perspective and not merely on the spur of the current boom. And it seems rather irrational to base it on short run memory ,that is on the current or very recent market data. One could imagine a variety of possible conclusions from this dilemma. The most radical conclusion would be that the business cycle is not a matter of fluctuations in fixed capital investment but rather a matter of inventory accumulation. In this way the contradiction would be cleanely eliminated. This is the path chosen by Goodwin in his paper The trend and the cycle (Goodwin 1982 p.116) where he appeals to the empirical work of Abramovitz which demonstrates the large extent and impact of fluctuations in inventory accumulation in the course of the cycle. Naturally Goodwin recognises that there are large fluctuations in fixed investment in the cycle as well but he regards these as induced by the inventory accumulation. Goodwin’s paper has led me to the following idea: It is reasonable to think that much of fixed investment is planned, projected and prepared with a long run perspective and quite independently of the cyclical conditions. This is specially true where the investment is motivated by technical considerations. It is only the timing of the ultimate realisation of the project which very often (but not necessarily) is synchronised with the cycle: The investment projects in question are not necessarily planned with a view to immediate execution but may be kept in store for some time. The time when they are taken out and executed is often the beginning recovery when an athmosphere of optimism infects the planner and overcomes his hesitations. A rational motive will be that at this juncture finance usually is cheapest and easiest to obtain. It may be noted that by this last explanation we also bypass an old contentious question: Whether or how far the rate of interest has an effect on investment. Even if it has none in the sense in which the question was always understood it would with high plausibility affect the timing of the investment. Even modest differences of the cost of borrowing in different periods of time might have a strong influence on the choice of time for execution of a big investment project. The idea of distinguishing two things: Whether or how to invest, and when to invest enables us to understand the double role of investment, as an irreversible trend component embodying new

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