ABSTRACT
To be sure, the path of economic growth is not and never has been smooth. But are the fluctuations we observe merely episodic, due to factors which occur without any regular pattern? Or are they true cycles – and if so, of what kind? A true cycle must show some regular pattern of fluctuation, which may be endogenous or exogenous. An endogenous cycle is one which is self-generating, so that the downswing sets forces in motion which lead to the next upswing, and vice versa. The Kitchin ‘inventory’ cycle is (or was) one such: Kitchin, writing in 192, found a pattern of fluctuations of growth rates of three to four years from peak to peak or trough to trough, which appeared to be due to overshoots and undershoots of business inventories or stocks: recovery from recession left firms short of stocks of raw materials, components and finished goods, which they then strove to rebuild. Their efforts to do so increased demand throughout the economy and were thus to a degree self-defeating; which led them to try harder. Suddenly they found they had succeeded all too well, and were obliged to cut back orders and output accordingly; which depressed the economy, and by doing so caused a further involuntary pile-up of stocks…
