Uncertainty and Contradiction: An Essay on the Business Cycle

Michalis Nikiforos
Written By SCEPA

WORKING PAPER

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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 the Harrodian instability. On the other hand, this instability is contained by the inherent contradictions of capitalism. We 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.

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