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TREND
AND
CYCLE
Anybody who writes on long term growth is in danger of taking a
larger bite than he can chew. I want at least to reduce the risk
by limiting myself to the demand aspects of the problem. This is
the question which occupied Rosa Luxemburg: How can capitalism
bent on high accumulation rates as it is find markets for its
products? At times the question seems pointless, at other times it
becomes so urgent that people wonder whether there is any future
in producing more goods.
The basis from which I start is Kalecki’s view (1943,1954,1968) on
long run growht, on what he calls the trend. He was exceedingly
brief on this subject, but I think that the following two
statements contain the essence of what he wrote:
a) A positive trend will only be generated by a continuing
exogenous influence,that is, if we exclude the influence of public
spending and of export surplusses ,by continuing technological
change which promises extra profits to the innovator.
b) The exogenous influence is combined with endogenous elements
and it is the two in their combined and mutual interaction which
produces the trend.Kalecki in this connection speaks of a "semi-
autonomous trend”. The endogenous element corresponds to a long
term memory, that is to the evolution of the economy in the recent
past ( where recent is to be understood as a series of
years,perhaps embodying a whole trade cycle ).
This requires a few comments: The term endogenous must be
specified by reference to a theoretical system which embodies all
the relations (the feedbacks or couplings) between the elements of
the system. In the present case the system is the macroeconomic
model of the main elements of the social accounting system such as
investment,income, profits,wages and employment etc. More
specifically it is the framework of Kalecki’s theory of the trade
cycle.
The essence of Kalecki’s position is that he denies the
possibility of explaining the trend by reference to endogenous
factors alone (see his polemic against Harrod,1962 ) but equally
also refuses to regard it as a purely exogenous phenomenon. The
present paper is concerned with a discussion of the two sets of
factors and the role which the one or the other may play in the
generation of the trend. It is thus basically no more than an
attempt to elucidate and elaborate the broad hints which Kalecki
has given on the subject.
Trend and cycle.
Trend and cycle are concepts which arise in the statistical
analysis of time series. They are distinguished and separated ex
post. Is there an economic meaning in these concepts which relates
them to economic behaviour? Some such meaning is certainly
presupposed in the theories of several authors: Kalecki’s pure
business cycle, Harrod’s analysis of long term growth and
cycle.The underlying economic idea seems to be this: