Introduction

The majority of the economic oscillations which we encounter seem to be explained most plausibly as free oscillations. In many cases they seem to be produced by the fact that certain exterior impulses hit the economic mechanism and thereby initiate more or less regular oscillations.

The most important feature of the free oscillations is that the length of the cycles and the tendency towards dampening are determined by the intrinsic structure of the swinging system, while the intensity (the amplitude) of the fluctuations is determined primarily by the exterior impulse. An important consequence of this is that a more or less regular fluctuation may be produced by a cause which operates irregularly. There need not be any synchronism between the initiating force or forces and the movement of the swinging system. This fact has frequently been overlooked in economic cycle analysis.

If a cyclical variation is analysed from the point of view of a free oscillation, we have to distinguish between two fundamental problems: first, the propagation problem; second, the impulse problem. The propagation problem is the problem of explaining by the structural properties of the swinging system what the character of the swings would be in case the system was started in some initial situation. This must be done by an essentially dynamic theory, that is to say, by a theory that explains how one situation grows out of the foregoing.