Development Blocks, Faulty Investment and Structural Tensions – The Åkerman- Dahmén Theory of the Business Cycle

Johan Åkerman and Erik Dahmén’s structural theory of economic fluctuations is a constructive alternative to traditional macroeconomic approaches and also to modern business-cycle models based on micro economic concepts. There are similarities between Åkerman and Dahmén’s theory and Schumpeter’s theory in Business Cycles. Both theories underline the importance of progressive industries for the recovery or prosperity phase. However, by the notions of faulty investment, structural tensions and development blocks, Åkerman and Dahmén provided an original explanation of the turning points in the business cycle. An empirical study of the severely overheated Swedish economy in the 1980s and the following depression did not confirm the Åkerman-Dahmén theory. One weakness of the theory is that it downplays the independent role of financial-market conditions. Åkerman and Dahmén’s theory is more valid for innovation-driven cycles such as the ICT boom in the late 1990s and the subsequent crisis.