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Lowe's and Hayek's influence on Harrod's trade cycle theory

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  • Daniele Besomi

Abstract

In 1926 Adolph Lowe pointed out that a system in a state of equilibrium is not capable of undergoing any change, and concluded that trade cycles cannot be explained within the framework of static analysis. Harrod seems to have become acquainted with this argument via Hayek's Monetary Theory and the Trade Cycle, where it was expressed in a weaker form. Harrod developed it into his instability principle, maintaining that a correct (endogenous) explanation of the cycle requires that the system is unstable. This argument preceded the actual elaboration of Harrod's cycles and growth mechanism, of which it provides the epistemic foundation.

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  • Daniele Besomi, 2002. "Lowe's and Hayek's influence on Harrod's trade cycle theory," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 9(1), pages 42-56.
    • Handle: RePEc:taf:eujhet:v:9:y:2002:i:1:p:42-56
    DOI: 10.1080/09672560110103379
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    References listed on IDEAS

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    1. Daniele Besomi, 1998. "Failing to Win Consent: Harrod’s Dynamics in the Eyes of His Readers," Palgrave Macmillan Books, in: Giorgio Rampa & Luciano Stella & A. P. Thirlwall (ed.), Economic Dynamics, Trade and Growth, chapter 2, pages 38-88, Palgrave Macmillan.
    2. Besomi, Daniele, 2001. "Harrod's Dynamics and the Theory of Growth: The Story of a Mistaken Attribution," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 25(1), pages 79-96, January.
    3. Simon Kuznets, 1930. "Monetary Business Cycle Theory in Germany," Journal of Political Economy, University of Chicago Press, vol. 38(2), pages 125-125.
    4. Gehrke, Christian, 1997. "Introduction to Adolf Lowe's 'How is business cycle theory possible at all?'," Structural Change and Economic Dynamics, Elsevier, vol. 8(2), pages 233-244, June.
    5. R. F. Harrod, 1934. "Doctrines of Imperfect Competition," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 48(3), pages 442-470.
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    Cited by:

    1. Mauro Boianovsky & Hans-Michael Trautwein, 2004. "HABERLER, THE LEAGUE OF NATIONS, AND THE SEARCH FOR CONSENSUS IN BUSINESS CYCLE THEORY IN THE 1930s," Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32nd Brazilian Economics Meeting] 002, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

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