Editing Business cycle (section)

=== Political business cycle ===
Another set of models tries to derive the business cycle from political decisions. The political business cycle theory is strongly linked to the name of [[Michał Kalecki]] who discussed "the reluctance of the 'captains of industry' to accept government intervention in the matter of employment".<ref>{{cite web|last=Kalecki|first=Michal|title=Political Aspects of Full Employment|date=January 1970|url=http://mrzine.monthlyreview.org/2010/kalecki220510.html|access-date=2 May 2012|url-status=live|archive-url=https://web.archive.org/web/20120407014237/http://mrzine.monthlyreview.org/2010/kalecki220510.html|archive-date=7 April 2012}}</ref>  Persistent [[full employment]] would mean increasing workers' bargaining power to raise wages and to avoid doing unpaid labor, potentially hurting profitability. However, he did not see this theory as applying under [[fascism]], which would use direct force to destroy labor's power.

In recent years, proponents of the "electoral business cycle" theory have argued that incumbent politicians encourage prosperity before elections in order to ensure re-election – and make the citizens pay for it with recessions afterwards.<ref>{{Cite journal | url=https://www.nber.org/papers/w1838 |doi = 10.3386/w1838|title = Elections and Macroeconomic Policy Cycles |last1 = Rogoff|first1 = Kenneth|last2 = Sibert|first2 = Anne |journal=Review of Economic Studies |volume=55 |issue=181 |pages=1–16 |date=January 1988 |doi-access=free }}</ref> The political business cycle is an alternative theory stating that when an administration of any hue is elected, it initially adopts a contractionary policy to reduce inflation and gain a reputation for economic competence. It then adopts an expansionary policy in the lead up to the next election, hoping to achieve simultaneously low inflation and unemployment on election day.<ref>• Allan Drazen, 2008. "political business cycles", ''[[The New Palgrave Dictionary of Economics]]'', 2nd Edition.  [http://www.dictionaryofeconomics.com/article?id=pde2008_P000112&edition=current&q=Political%20business%20cycle&topicid=&result_number=4 Abstract.] {{webarchive|url=https://web.archive.org/web/20101229135043/http://www.dictionaryofeconomics.com/article?id=pde2008_P000112&edition=current&q=Political%20business%20cycle&topicid=&result_number=4 |date=2010-12-29 }}<br />&nbsp;&nbsp; • [[William D. Nordhaus]], 1975. "The Political Business Cycle", ''Review of Economic Studies'', 42(2), pp. [https://www.jstor.org/discover/10.2307/2296528?uid=3739936&uid=2&uid=4&uid=3739256&sid=21101641116423 169]–190.<br />&nbsp;&nbsp; • _____, 1989:2. "Alternative Approaches to the Political Business Cycle", ''Brookings Papers on Economic Activity'', p [https://www.jstor.org/pss/2534461 pp. 1]–68.</ref>

The ''partisan business cycle'' suggests that cycles result from the successive elections of administrations with different policy regimes. Regime A adopts expansionary policies, resulting in growth and inflation, but is voted out of office when inflation becomes unacceptably high. The replacement, Regime B, adopts contractionary policies reducing inflation and growth, and the downwards swing of the cycle. It is voted out of office when unemployment is too high, being replaced by Party A.