Uncertainty and Contradiction : An Essay on the Business Cycle

The present paper presents a discussion of the forces at play behind the economic fluctuations in the medium run and their relation with the short-run macroeconomic equilibrium. The business cycle is the result of two separate phenomena. On the one hand there is the instability, which is caused by the discrepancy between the expected and the realized outcomes. On the other hand, this instability is contained by the inherent contradictions of capitalism; the upswing carries “within it the seeds of its own destruction”. The same happens with the downswing. A formal exposition of these insights is provided. It is discussed how the formulation of this mechanism resembles the simple harmonic motion of Classical mechanics. Finally, an empirical evaluation is provided