The Trade Cycle; why I=S is a bad place to start doing macro
by Rick Rowe
In the olden days, economists used to talk about the trade cycle. (They meant a cycle in the amount of all trade, not just international trade). They meant a cycle in the amount of exchange. There are fluctuations over time in the amount of buying and selling that people do. In a boom, trade speeds up; and in a recession, trade slows down.
I think we should resurrect that old term. Thinking about the trade cycle is a better way of thinking about short run macroeconomics than how we currently think about it. Nowadays we don't talk about fluctuations in trade; instead we talk about fluctuations in output. It's not the same thing. We are wrong; the old guys were right. Somewhere, maybe around the 1920's or 1930's (I wish I were better at history of thought) macroeconomics took a wrong turn.
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I think we should resurrect that old term. Thinking about the trade cycle is a better way of thinking about short run macroeconomics than how we currently think about it. Nowadays we don't talk about fluctuations in trade; instead we talk about fluctuations in output. It's not the same thing. We are wrong; the old guys were right. Somewhere, maybe around the 1920's or 1930's (I wish I were better at history of thought) macroeconomics took a wrong turn.
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Veja também
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