Glamor Economics

Chapter 182

Chapter 23 The Natural Cycle of Prosperity and Recession—The Business Cycle

Section 1 Grasping the "Big Climate" of the Economy——Business Cycle

Business cycle, also known as business cycle or business cycle, refers to the fluctuation of gross national output, total income and total employment.This kind of fluctuation is basically characterized by the general expansion or contraction of major macroeconomic variables, such as employment rate, price level, and total output.Economic cycles generally have lengths.The following mainly introduces the theory of several economic cycles.

1.Kuznets cycle, a long economic cycle, is a 1930-15-year economic cycle proposed by the American economist Kuznets in 25, with an average length of about 20 years.Since this cycle is mainly divided by the periodic fluctuation phenomenon of the prosperity and decline of the construction industry, it is also called the "construction cycle".

2.The Jugra cycle is a mesocycle. In 1862, French doctor and economist Clement?Jugla first proposed it in the book "On the Commercial Crisis and Occurrence Cycle in France, Britain and the United States".It is proposed that there are 9-10 year cycle fluctuations in the market economy.This medium-length economic cycle is generally called "Jugra cycle" by later generations, also known as "Jugra cycle".

3.Kitchin cycle is a short cycle, also known as "short wave theory". 1923 American Joseph?Kitchin started from the phenomenon that when manufacturers produce too much, they will form inventories and reduce production. In "Cycles and Tendencies in Economic Factors", he called this short-term adjustment of 2 to 4 years "inventory cycle". , also known as the "Kitchin cycle".

4.The Kondratiev cycle is a long cycle, a 1926-50-year economic cycle proposed by the Russian economist Kondratiev in 60.According to the cycle theory, since the end of the 18th century, there have been three long cycles.The first long cycle is from 1789 to 1849, the rising part is 25 years, the falling part is 35 years, a total of 60 years.The second long cycle is from 1849 to 1896, with a rise of 24 years and a decline of 23 years, a total of 47 years.The third long cycle started in 1896, the rising part lasted for 24 years, and entered the falling period after 1920.

The figure below reflects the situation of my country's 30-year economic cycle of reform and opening up.

从1978年以来，我国经济增长率最高的波峰年分别是1978年（11.7%）、1984年（15.2%）、1992年（14.2%）和2007年（13%）；经济增长率最低的波谷年分别是1981年（5.2%）、1990年（3.8%）、1999年（7.6%）和2009年（假设2009年为本轮周期的波谷年，增长率为8％）。如果依据波峰年计算周期的长度，从1978年到2007年的29年间，总共形成了3个经济周期，周期的平均长度为9.66年；若依据波谷年计算周期的长度，从1981年到2009年的28年间也形成了3个经济周期，周期的平均长度为9.33年。

The economic cycle is both destructive and self-regulating.In the economic recession, some enterprises go bankrupt and quit the competition; some enterprises suffer from losses and find new ways out;

Business cycles can affect us through many important channels.For example, when output rises, it becomes easier to find a job; when output falls, it becomes harder to find a dream job.

The impact of different stages of the economic cycle: The expansion stage of economic cycle fluctuations is a season of increasingly active macroeconomic and market environments.At this time, the market demand is strong, orders are full, products sell well, production tends to increase, and capital turnover is flexible.The supply, production, and sales of enterprises, as well as people, money, and materials are all relatively easy to arrange.Enterprises are in a relatively relaxed and favorable external environment.The contraction phase of economic cycle fluctuations is the season when the macroeconomic environment and market environment are becoming increasingly tightened.At this time, market demand is weak, orders are insufficient, goods are unsalable, production is declining, and capital turnover is not smooth.Enterprises will encounter many difficulties in terms of supply, production, sales and personnel, finance and materials.Enterprises are in a relatively harsh external environment.

As a member of the market economy, enterprises must understand and grasp the economic cycle fluctuations, and formulate corresponding countermeasures to adapt to the cycle fluctuations, otherwise they will lose their vitality in the fluctuations.Under the condition of market economy, enterprises are more and more concerned about the economic situation, that is, changes in the "economic climate".

As a government department, understanding the operating laws and characteristics of the economic cycle in a market economy will help the government enhance predictability and avoid hysteresis when formulating expansionary or contractionary economic policies and making policy transitions.

[links to related words]

The sunspot theory attributes the cyclical fluctuations of the economy to the periodic changes in sunspots.Because the cyclical changes in sunspots will affect the cyclical changes in the climate, which in turn will affect agricultural harvests, which in turn will affect the entire economy.The appearance of sunspots is regular, about once every ten years, and the economic cycle is also about ten years.The theory was proposed by British economist Jevons in 1875.

Innovation theory Austrian economist Schumpeter proposed a concept to explain economic fluctuations and development.The so-called innovation refers to a new production function, or a new combination of production factors.The emergence of new combinations of production factors will stimulate economic development and prosperity.When new combinations appear, old combinations of factors of production still exist in the market.The coexistence of new and old combinations will inevitably provide profitable conditions for the innovators of the new combination.And once the technology with the new combination diffuses and is acquired by most companies, the final stage—the stagnation stage—is approaching.In the stagnation stage, because there is no new technological innovation, it is difficult to stimulate large-scale investment, so it is difficult to get out of the depression.This situation will not be broken until the emergence of new innovations, and new prosperity will emerge.

(End of this chapter)