A Non-linear Theory of the Cycle

Abstract

When a leading theorist has his attention diverted to business cycle analysis, the result is usually a happy one, as witness the examples provided by Schumpeter, Pigou, Frisch, J. M. Clark, Harrod and Haberler. The most recent of Professor Hicks’s works continues this impressive record.¹ It is a book which no one interested in the cycle—and what economist is not? — can afford to miss reading. The following bare enumeration of its accomplishments should suffice to make this clear: (i) an elegant restatement of the General Theory on dynamic lines, (ii) a basic elaboration of Mr Harrod’s multiplier-accelerator version of Keynes, (iii) an alteration of accelerator theory which removes its major flaw (as distinguished from numerous lesser ones), (iv) the use of this alteration to suggest a solution to a central, unsolved problem, i.e. the persistence of cycles, and (v) a reaffirmation and restatement of the role of money in the cycle in such a way as to give it an ancillary, though important, role. Such a theoretical offering, so well written, in such narrow compass (168 pp.), for so little ($2.25), is most welcome, especially if we compare it with the ponderous, uninspired, expensive texts which are continually being hurled at us. It will speak most directly to the professional economist, for it is essentially an experimental effort, a true ‘model’, but my guess is that it was also aimed at the better undergraduate and graduate students as well. A preliminary trial has convinced me that, while it has to be taught, the book’s central thesis can be understood by honours undergraduates.