New Perspectives on Business Cycles

Traditional aggregate theories of the business cycle, Keynesian or the neoclassical, have not succeeded in explaining the severe down turns in the United States and other advanced economies. New Perspectives on Business Cycles proposes a theory that economic inequality and heterogeneity in a market economy may be an important influence on business cycles. The author, Satya Das, provides for the first time a systematic assessment of possible links between business cycles and changes in the distribution of income and wealth.Arguing that changes in the distribution of wealth and income in a private market economy can generate variations in the aggregate output, Professor Das uses a series of models to relate economic inequalities across households to fluctuations in the economy. In particular, he argues that severe inequities in wealth and income distribution can lead to fluctuations in a macroeconomy, with important implications for the financial markets. Empirical evidence from the post-war US economy is presented in support of this theory.