Uncertainty and Contradiction: An Essay on the Business Cycle
- 23 December 2015
- journal article
- research article
- Published by SAGE Publications in Review of Radical Political Economics
- Vol. 49 (2), 247-264
- https://doi.org/10.1177/0486613415621748
Abstract
The paper develops a model of economic fluctuations in the medium run and their relation with the short-run macroeconomic equilibrium. The business cycle is the result of two separate forces. On the one hand, there is Harrodian instability. On the other hand, this instability is contained by the inherent contradictions of capitalism. I focus on two of these contradictions: the profit-squeeze that results from the tightening of the labor market as employment and utilization increase, and the financial instability hypothesis as formulated by Hyman Minsky. With the inclusion of overhead labor, the model can explain the U-shaped behavior of the wage share along the business cycle (wage share decreases for low levels of utilization and increases for higher levels) that prevailed in most of the post-WWII period, as well as the decrease in the wage share as utilization increases that has been observed in the most recent cycles.Keywords
Other Versions
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