ABSTRACT
A research question How are economic and political cycles intertwined? A group of historians of economic thought and economic historians pursued this seemingly simple research question in a series of discussions that led to the present book. A first answer consists in the trite observation that economics reflects the fact of the cycle by explaining it. Then, intervention is considered in a second approximation. Keynes had hoped that state control of the investment process might stabilise the cyclical movement of modern industrial economies. Kalecki realised, going one step further, that intervention would be regarded as more desirable by labour and the left, but possibly be opposed by the right so that a political cycle might result in which employment policies and laissez-faire would alternate. With this consideration, there are now four types of actors in the game: capital and labour (or entrepreneurs and workers), the state and the electorate (or politicians and voters); the economist remains in the background. As one looks more closely into the matter still, one discovers further complications of the interaction. The very “facts” here depend on the perception. For what is a cycle or a crisis? The entrepreneurs feel it, when their markets shrink in the downswing, or the bankers, when debts remain outstanding, or the workers, when dismissals take place and it gets more difficult to find new employment. Of course, there are always, even during the boom, some firms in difficulties, some borrowers unable to pay, some individual employment problems. What concentration of such events justifies general alarm, the declaration of a crisis and the invitation of state action? A diagnosis is needed. The gravity of the situation must somehow be measured. As the diagnosis depends on economic theory, so do the measures to be taken or decisions to renounce to intervention. Cause and effect must be scientifically analysed, and before instruments are used, it must be assessed, whether their use is likely to pay off. The economist steps forward and becomes the master of the game by ordering the concepts. But the scientific evaluation should seem reasonable to the general public, for crises are observed by many and felt by most – only a few live in material conditions that allow them to keep their eyes closed in front of the calamities around them. Practitioners and the general public will notice crisis phenomena before professional economists begin to analyse them.
