Fifteen years after the Global Financial Crisis: Recessions and Business Cycles in the History of Economic Thought

Some reflections on Hicks’s ideas on trade cycles, from the 1930s to the the 1980s

Ingrao Bruna, Fondazione Sapienza University of Rome
Sardoni Claudio, Sapienza University of Rome

The paper examines Hicks’s views on trade cycles and their evolution from the 1930s to the 1980s. We look at Hicks’s positions in Value and Capital (1939[1965]), in A Contribution to the Theory of the Trade Cycle (1950) and in his Robbins lecture ‘Are there Economic Cycles?’ (1982) in which he takes a rather critical position on his previous approach, suggesting that it is problematic to provide a general theory of trade cycles. We focus on Hicks's lecture in 1982, where he raises a number of significant questions and, in particular, he focuses on the way in which the historical-institutional (both national and international) context affects the way in which booms, depressions and stagnation occur at different times. The examination of Hicks’s approach to cycles and crises allows us to address some topics that are still open questions in the contemporary macroeconomic debate. • The dichotomic nature of interpretations juxtaposing real business cycles with monetary interpretations of severe depressions, and in general the nature of short-term oscillations versus the emergence and persistence of major macroeconomic crises; • The unexplained nature of shocks both in Keynesian and in neoclassical models. Are real shocks ‘black swans’? Are they unexpected, casual events? Or, on the contrary, are they the result of geopolitical or institutional crises not properly anticipated, but which may be explained as a plausible chain of events in general historical scenarios? • Is an equilibrium trend an a-priori postulate? Or is it the result of cumulative tendencies generated by the historical evolution characterized by institutional and economic changes that affect the rate of growth? • How do institutions affect the reactions and the resiliency to shocks and fluctuations by households, firms and financial institutions? ------ Hicks, J. R. (1939[1965]), Value and Capital. An Inquiry into some Fundamental Principles of Economic Theory, Oxford: Oxford University Press, 2nd edn. Hicks, J. R. (1950), A Contribution to the Theory of the Trade Cycle, Oxford: Clarendon Press. Hicks, J. (1982), ‘Are there economic cycles?’ in Money, Interest & Wages. Collected Essays on Economic Theory, Oxford: Blackwell, vol. 2 of Collected Essays on Economic Theory, pp. 332–346

Area: Eshet Conference

Keywords: Trade cycles, economic crises, J. Hick's contributions

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