Having triggered a lot of debates, the theory of business cycles is the most oft-cited branch of modern macroeconomics. Since the middle of the 20th century (i.e. Milton Friedman’s monetarism showed up) extremely important research activity has been initiated at some high-flying universities in the U.S. Due to these efforts our understanding of the causes of the macro-economic fluctuations that come upon capitalist societies time and again has considerably improved. What is more, by now we not only have known a great deal about the nature of business cycles but also about the possible ways of treatment. The high importance of these theories is clearly indicated by the large number of Nobel prizes awarded for the related achievements.
What today is regarded as the modern theory of the business cycle ought not to be taken as a monolith, but rather as a sophisticated system consisting of the succeeding stages of a multidecade-long evolution. This progress comprehends important changes even in terms of both the fundamental questions and the answers provided. Whilst Friedman and Lucas were interested in the cyclical effects of changes in the money supply, theorists in the RBC-movement studied the effects of some real variables that had previously been sorted to the territory of growth theories. This change of interest was facilitated by a neutral monetary policy in the U.S. against the background of which studying real business cycles was not interfered with some erratic changes in monetary policy. As far as the assumptions of the theories are considered (e.g. adaptive expectations vs. rational expectations; or money-economy vs. barter economy), they show an even higher degree of diversity.
For the time being multiple disciplines regard the modern theory of the business cycles as belonging to their fields of interest. Historians of the economic thought are engaged in the reconstruction of the theoretical content and oftentimes in the evaluation of the economic policy consequences. Here the analysis of the methodological background is only of marginal importance. Studies that reckon methodological analysis as a crucial constituent in the theoretical reconstruction has appeared only very recently. These efforts ought to be regarded as pathbreaking initiations (for the most important item, see: De Vroey, M. : A History of Macroeconomics from Keynes to Lucas and Beyond. Cambridge: Cambridge University Press). By contrast, modern philosophy of economics has put the study of modern macroeconomics under the general interest in economic methodology. It means that the methodological peculiarities specific to modern business-cycle theories cannot receive special attention. The discourse here is about the methodology of “economics” as such rather than about the methodology of one of its element worth of interest. One of the few exceptions picked as its subject the methodological recommendations of an emblematic chapter of business-cycle theory (Mäki, Uskali : The Methodology of Positive Economics. Cambridge: Cambridge University Press). It is still a question whether these ideas can be extended to the post-Friedmanian achievements.
According to the present stage of our discipline, these two approaches (the history of the economic thought and the methodology of economics) are two distinct directions. Considering methodological aspects in the history of economics is further hindered by the fact that methodology as a subdiscipline started out as being treated by the historiography of economics as troublesome and void (Weintraub, E. Roy : Methodology Doesn’t Matter, But the History of Thought Might, Scandinavian Journal of Economics, 91(2): 477-493). One of the most worrying consequences of this situation is the fact that new insights occurred in methodology cannot or can only slowly and superficially build into the historiographical narratives. A methodologically oriented history of modern business-cycle theories can fill this lacuna. The mere existence of this lacuna refers to the problem that the positive content of a theory can hardly be separated from the methodological foundations on which it was created. What we conceive of the possibility of accumulating knowledge of the surrounding reality; of the roles our assumptions underlying our models play; or of the relationship between our theory and the rival approaches: these considerations require solid methodological footing that may change how we interpret the very theoretical content. It is enough to refer to the enduring debates around the use of some fundamental concepts such as voluntary unemployment. If one does not pay attention to the fact that modern business-cycle theories made enquiries into the nature of the voluntary component of unemployment, she will think that these theories regarded unemployment as purely voluntary. However, recognizing this peculiarity requires us to clarify the relation of models to reality—which amounts to a methodological analysis.