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January 17, 2007
Long waves
There's a well-accepted concept in economics called the business cycle, which says the national economy goes through ups and downs, or booms and busts, about every 10 years. But there's also the theory that the economy goes through longer cycles. N.C. State University economist Mike Walden explains.
"We do have the short business cycles, which are well-established. In fact, the government tracks them and dates them. The business community knows about them," says Dr. Walden, a professor of agricultural and resource economics. "But there is another theory which suggests that instead of going through these shorter 10-year cycles -- or we do go through the shorter 10-year cycles, but they are parts of a bigger cycle –- maybe a cycle lasting 50 to 60 years.
"This generally is called the long wave theory, and it is based on the notion that what is ultimately pushing economies are big factors like changes in demographics, in world trade, even political and social events," Walden adds.
"So if you believe this long-wave theory, you can go look it up and see where we are on the current cycle. And it's actually not very good news. The current believers of the long wave theory say that we are actually on the downward part of the latest 50- or 60-year cycle, and it's going to be several more decades before we bottom out and head up again."
Posted by deeshore at January 17, 2007 08:46 AM