Causal and Stochastic Elements in Business Cycles: An Essential Extension of Macroeconomics Leading to Improved Predictions of Data

by Arvid Aulin

Overview

1. Facts: A leisure term with an unbounded value function, when added to utility in the Lucas (1988) 'mechanics of economic development', expands enormously the range of data covered by the theory. To explain this we have to ask two questions. First: why leisure would be so much desired? Perhaps because leisure is one's own time and such a leisure term means an unbounded value of individual freedom. But why leisure is economically productive, as implied by the results obtained in this study? Perhaps because cognitive innovations often occur during the time which in economics is registered as leisure? Then an unbounded leisure term would also make room for an unbounded creation of knowledge, as distinguished from the mere transmission of knowledge in education and training. In any case the leisure term seems to act as if it where the'hole' through which strong nonmaterial values affect economics. The ensuing 'extended mechanics' is derived in Chapters 4-6 and proves to involve an extension of growth theory as well as a theory of the causal part of business cycles. Their empirical verification is given by showing (i) that the existence of the two Basic Growth Paths derived from this theory, defining its Growth Type 1 and Growth Type 2, respectively, is verified already by the statistics collected by Solow (1957) but ignored so far (see Chapter 5 of the present study); one of them, viz.

Product Details

ISBN-13:	9783540605935
Publisher:	Springer Berlin Heidelberg
Publication date:	02/19/1996
Series:	Lecture Notes in Economics and Mathematical Systems , #431
Edition description:	Softcover reprint of the original 1st ed. 1996
Pages:	116
Product dimensions:	6.10(w) x 9.25(h) x 0.01(d)

Table of Contents

I. The Mathematical Tools.- 1. The Hamilton-Jacobi Theory.- 2. Maximization of Accumulating Utility.- II. The Lucas Growth Theory and Its Generalization to Business Cycles.- 3. The Lucas Growth Theory.- 4. Generalization to Include Business Cycles.- III. The General Theory of Economic Growth and Business Cycles.- 5. The Basic Growth Paths.- 6. The Basic Business Cycles.- IV. The Basic Business Cycles as the Causal Part of Business Cycles.- 7. The Predictive Power of the Basic Cycles Compared With That of the Shastic Models: Ordinary Business Cycles.- 8. Conclusions and Challenges.- 9. The Dynamics of Anomalous Basic Business Cycles and Its Quantitative Verification.- V. The Effects of Nonmaterial Values and Other Ignored Factors Upon Economic Growth.- 10. Primary Causal Factors of Economic Growth.- 11. The Growth Effects of Savings Rate.- VI. An Alternative Vision of the Shastic Element in Business Cycles.- 12. Shastic Shocks as Perturbations Superposed Upon the Basic Business Cycles.- 13. Final Result: Both the Shastic and Nonshastic BBC Versions Predict Better Than Any of the Models Based On Shastic Optimization.- References.- Appendix 1: The Dependence of the Predicted Anomalous Correlations on Savings Rate.- Appendix 2: Numerical Tables.