In the history of economics, no subject has been more puzzling than the business cycle. Although numerous theories have been suggested since the cycle was first recognized late in the eighteenth century, none of them has succeeded in providing a full explanation of this phenomenon. The causes of the cycle suggested by these theories seem to cover every kind of economic and noneconomic factor one could imagine. Some examples may be illustrative.

Jevons (1884) firmly believed in his “scientific” explanation, according to which the fundamental cause of the business cycle lay in the periodic movement of sun spots. H. L. Moore (1914) postulated a similar “law” of economic cycles, suggesting that the rhythm of economic time series was generated by the rainfall cycle. According to Moore, the rainfall cycle was caused by the movement of Venus, which came into the path of solar radiation to the earth at intervals of eight years. Its magnetic field affected the stream of electrons from the sun and thus disturbed the magnetism of the earth and its rainfall. Hexter (1925) even claimed that the business cycle was linked to the human emotions of optimism and pessimism, which were themselves causally connected to the death of friends or close relatives and the prospect of having children; he concluded that the control of population could change the course of business cycles.