BA, Oberlin College, 1987, Economics
The idea of a politically-motivated business cycle is basically
a conspiracy theory: "office-motivated" politicians, seeking to
exploit the well-documented relationship between favorable
economic news and votes for the incumbent president and his party,
manipulate the timing of business cycles for their own electoral gain. This manipulation, theorists maintain, is effected through the use of any of several policy instruments including discretionary federal spending, government transfer payments, and the average tax rate, as well as pressure on the central bank to pursue a more accommodating monetary policy.
Theories of such a cycle seem to fall in and out of favor with
each passing presidential election. William Nordhaus's pioneering
paper, "The Political Business Cycle" (1975), emerged in the aftermath of Richard Nixon's 1972 re-election campaign, which even a former Nixon speechwriter described as a case of "open[ing] the sluices and letting the dollars flow." Edward Tufte, author of Political Control of the Economy, an in-depth analysis of the interdependence of economics and elections, has. acknowledged that Nixon's re-election was the inspiration for his book as well. Currently, after the supply shocks of the mid- and late-1970s, which in 1980 resulted in a (presidential) election-year recession for the first time since 1960, "there has been relatively little theoretical work on the 'political
business cycle' for several years." With the re-election of Ronald
Reagan in 1984, however, after which some observers claimed they detected
a political cycle behind the economic growth patterns of the 1981-84
period , the next few years may well see a resurgence of political business cycle (PBC) literature.
In keeping with the present lull in new PBC theories, many
economists, in reviews of PBC literature and elsewhere, have been
sharply critical of the previous empirical work in this area. James Alt and K. Alec Crystal, in their 1983 book Political Economics. conclude a (open full item for complete abstract)
Committee: Edward Gamber (Advisor); Hirschel Kasper (Advisor); Robert Piron (Advisor); James Zinser (Advisor); Luis Fernandez (Advisor)
Subjects: Economic History; Economic Theory; Economics; Political Science