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Philip Mirowski, The Birth of the Business Cycle

Francisco Louçã
p. 529-531
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Philip Mirowski, The Birth of the Business Cycle, New York: Routledge, 2015, 320 pages, ISBN 978-113885813-8.

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Crédits : Routledge

1The Birth of the Business Cycle results from a 1979 PhD dissertation by Philip Mirowski, a “lumbering and unwieldy manuscript” (according to the 1985 preface by the author), first revised in 1980 and discretely published in 1985 by Garland Publishing. Since then it could be found in some libraries but certainly not everywhere. Thirty years passed and it is now available for a larger public. Yet, Routledge preferred to print it as a facsimile of the original edition, failing to correct the mistyping errors and imposing on the reader the effort to follow a cumbersome presentation. Furthermore, there is no new introduction or explanation by the author, who chose in the past not to reprint the book.

2The author eventually considered that the book is outdated (Mirowski emphasizes in the preface that it was not updated in order to consider the literature between 1979 and 1985, since it does not comprise what was written after the original publication) and sketchy on the connection between the theoretical and the historical parts (the two books of the original dissertation were compressed into the current volume).

3Yet it is interesting and relevant for all the students of business cycles and eventually for the understanding of the later evolution of the author, from the scholar contribution on the origins of the neoclassical revolution (More Heat than Light, 1989) to the study on complexity in economics (Machine Dreams, 2001) and to the inquiry into the current financial crisis (Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown, 2013), not to mention the many papers in different journals.

4The book investigates the first great debates on business cycles, including enlightening historical details. One tasty episode is the 1772 letter by David Hume to Adam Smith on the bankruptcy of the Carron Company, inquiring on the effect on his theory, to no result, given the early classicals’ aversion to discuss gluts (18). But it also includes forceful arguments on the modern pillars of macroeconomics. That is the case of the discussion on the contradictions of Keynes’ approach to cycles, given his unexplained concept of marginal efficiency of capital (54), on the contribution by Thorstein Veblen on the accumulation of capital, and lately by Wesley Mitchell, who benefitted from the comparison to the ridicule of Irving Fisher after 1929 and produced the most consistent empirically oriented research on cycles. Finally, the book presents a consistent rebuttal of the theory of cycles as collapses generated by auto-correlated shocks impinging on an inherently stabilizing process. This is a major contribution, since the propagation-impulse dichotomy has been for long the epicenter of the theory and modeling of cycles. The section on time is also illuminating of the contrast between this approach and the real life economics (96 f.).

5Mirowski discusses the orthodox view(s) of cycles both from the point of view of the method and the reality. As far as the method is concerned, he anticipates some of his later concerns and critiques of neoclassical economics as an artificial construct and a metaphor from the laboratory experiments reproducing the conditions of the closed universe of the first law of thermodynamics. In this sense, economics as a description of a stable but artificially insulated part of the economy is criticized for its irrelevancy.

6In the following, he presents the building blocks of an institutionalist theory of the cycle (127 f.), historically defined, as opposed to the orthodox dichotomy of endogenous and exogenous variables in the framework of a simple model representing the apparatus of equilibration.

7The author scorns the Schumpeterian analysis of cycles, as being produced by “waves of gadgets”, a factor of “minor importance” (279). Unfortunately, he is right for some of the Schumpeterian followers, whose views are eventually too limited to the technological side and to simple changes in the supply side. But this does not make justice to other evolutionary contributions, namely those considering the socio-institutional framework and arguing for a theory based on ignition of change through innovations (Schumpeter), but also considering the institutional and social framework (Veblen, Marx) and the demand side (Keynes), or the mismatch between the technology and social conditions (Chris Freeman). Although it is right that until 1979 these contributions were still in their infancy, the turn in the debates on cycles was initiated, and certainly by 1985 some relevant contributions were made in that sense.

8The book is constructed dealing first with the theories and then with evidence, although this is limited to the definition of a sample of firms for the computation of a profit index, allowing for dating of cycles. This is not a trivial job, as it involves a detailed research on the available information on 17 firms for the eighteenth and early nineteenth century (201 f.). Mirowski proves his talent on the painstaking historical investigation, studying the accounts of these firms and using the material for a general conclusion on the rhythm of the business cycle. A curious discussion and test of Jevons’ sunspot theory, using a Granger-Wald chi-squared causality test, is presented in the following (258 f.).

9For all these reasons, the reader and student on business cycles can only thank the publication of a book otherwise unavailable, and take the effort to read it in spite of the unfriendly presentation.

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Francisco Louçã, « Philip Mirowski, The Birth of the Business Cycle »Œconomia, 5-4 | 2015, 529-531.

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Francisco Louçã, « Philip Mirowski, The Birth of the Business Cycle »Œconomia [En ligne], 5-4 | 2015, mis en ligne le 01 décembre 2015, consulté le 06 mars 2021. URL : ; DOI :

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Francisco Louçã

Universidade de Lisboa,

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