Business Cycles: Continuous Time

Abstract

The invention by Paul Samuelson in 1939 of the business cycle machine, combining the multiplier and the accelerator, certainly was a major event. That two such simple forces as consumers spending a given fraction of their incomes on consumption and producers keeping a fixed ratio of capital stock to output (=real income) combined to produce cyclical change was simple, surprising and convincing at the same time. This model if any qualifies for the attribute of scientific elegance. In passing it should be stressed that the Keynesian macroeconomic outlook was an essential background.