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The Time-to-Build Tradition in Business Cycle Modelling

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  • N. Dharmaraj
  • K. Vela Velupillai

Abstract

An important frontier of business cycle theorising is the 'time-to-build' tradition that lies at the heart of Real Business Cycle theory. Kydland and Prescott (1982) did not acknowledge the rich tradition of 'time-to-build' business cycle theorising - except in a passing, non-scholarly, non-specific, reference to Böhm-Bawerk's classic on Capital Theory (Böhm-Bawerk [1899]), which did not, in any case, address cycle theoretic issues. The notion of ‘time-to-build’ is intrinsic to any process oriented production theory which is incorporated in a macrodynamic model. We provide an overview of this tradition, focusing on some of the central business cycle classics, and suggest that the Neo-Austrian revival should be placed in this class of dynamic macroeconomics, albeit ‘traverse dynamics’ is itself to be considered as a fluctuating path from one equilibrium to another.

Suggested Citation

  • N. Dharmaraj & K. Vela Velupillai, 2011. "The Time-to-Build Tradition in Business Cycle Modelling," ASSRU Discussion Papers 1109, ASSRU - Algorithmic Social Science Research Unit.
    • Handle: RePEc:trn:utwpas:1109
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    1. Amendola, Mario & Gaffard, Jean-Luc, 1998. "Out of Equilibrium," OUP Catalogue, Oxford University Press, number 9780198293804.
    2. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    3. Bjorn Thalberg, 1961. "An Analysis of A Market for Investment Goods," International Economic Association Series, in: D. C. Hague (ed.), The Theory of Capital, chapter 0, pages 161-174, Palgrave Macmillan.
    4. F. A. Lutz, 1961. "The Theory of Capital," International Economic Association Series, Palgrave Macmillan, number 978-1-349-08452-4 edited by D. C. Hague, December.
    5. Thomas Mayer, 1959. "Plant and Equiptment Lead Times," The Journal of Business, University of Chicago Press, vol. 33, pages 127-127.
    6. Samuelson, Paul A, 1972. "Maximum Principles in Analytical Economics," American Economic Review, American Economic Association, vol. 62(3), pages 249-262, June.
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    Cited by:

    1. K. Vela Velupillai, 2011. "Remembering Clower," ASSRU Discussion Papers 1121, ASSRU - Algorithmic Social Science Research Unit.

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