Kondratiev wave

The Soviet economist Nikolai Kondratiev (also written Kondratieff or Kondratyev) was the first to bring these observations to international attention in his book The Major Economic Cycles (1925) alongside other works written in the same decade.[4][5] In 1939, Joseph Schumpeter suggested naming the cycles "Kondratieff waves" in his honor.

Two Dutch economists, Jacob van Gelderen and Salomon de Wolff, had previously argued for the existence of 50- to 60-year cycles in 1913 and 1924, respectively.

Since the inception of the theory, various studies have expanded the range of possible cycles, finding longer or shorter cycles in the data. The Marxist scholar Ernest Mandel revived interest in long-wave theory with his 1964 essay predicting the end of the long boom after five years and in his Alfred Marshall lectures in 1979. However, in Mandel's theory there are no long "cycles", only distinct epochs of faster and slower growth spanning 20–25 years.

In 1990, William Thompson at Indiana University has published influential papers and books documenting eighteen K-Waves dating back to 930 AD in China's Song Dynasty;[6] and Michael Snyder wrote: "economic cycle theories have enabled some analysts to correctly predict the timing of recessions, stock market peaks and stock market crashes over the past couple of decades".[7]

The historian Eric Hobsbawm also wrote of the theory: "That good predictions have proved possible on the basis of Kondratiev Long Waves—this is not very common in economics—has convinced many historians and even some economists that there is something in them, even if we don't know what".[8]

Kondratiev identified three phases in the cycle, namely expansion, stagnation and recession. More common today is the division into four periods with a turning point (collapse) between the first and second phases.

Writing in the 1920s, Kondratiev proposed to apply the theory to the 19th century:

• 1790–1849, with a turning point in 1815.
• 1850–1896, with a turning point in 1873.
• Kondratiev supposed that in 1896 a new cycle had started.

The long cycle supposedly affects all sectors of an economy. Kondratiev focused on prices and interest rates, seeing the ascendant phase as characterized by an increase in prices and low interest rates while the other phase consists of a decrease in prices and high interest rates. Subsequent analysis concentrated on output.

Inequity appears to be the most obvious driver of Kondratiev waves, and yet some researches have presented a technological and credit cycle explanation as well.

There are several modern timing versions of the cycle although most are based on either of two causes: one on technology and the other on the credit cycle.

Additionally, there are several versions of the technological cycles and they are best interpreted using diffusion curves of leading industries. For example, railways only started in the 1830s, with steady growth for the next 45 years. It was after Bessemer steel was introduced that railroads had their highest growth rates. However, this period is usually labeled the age of steel. Measured by value added, the leading industry in the U.S. from 1880 to 1920 was machinery, followed by iron and steel.[16]

Any influence of technology during the cycle that began in the Industrial Revolution pertains mainly to England. The U.S. was a commodity producer and was more influenced by agricultural commodity prices. There was a commodity price cycle based on increasing consumption causing tight supplies and rising prices. That allowed new land to the west to be purchased and after four or five years to be cleared and be in production, driving down prices and causing a depression as in 1819 and 1839.[17] By the 1850s, the U.S. was becoming industrialized.[18]

The technological cycles can be labeled as follows:

• Industrial Revolution (1771)
• Age of Steam and Railways (1829)
• Age of Steel and Heavy Engineering (1875)
• Age of Oil, Electricity, the Automobile and Mass Production (1908)
• Age of Information and Telecommunications (1971)

Some argue that this logic can be extended. The custom of classifying periods of human development by its dominating general purpose technology has surely been borrowed from historians, starting with the stone age. Including those, authors distinguish three different long-term metaparadigms, each with different long waves. The first focused on the transformation of material, including stone, bronze, and iron. The second, often referred to as industrial revolutions, was dedicated to the transformation of energy, including water, steam, electric, and [[combustion engine|combustion power]. Finally, the most recent metaparadigm aims at transforming information. It started out with the proliferation of communication and stored data and has now entered the age of algorithms, which aims at creating automated processes to convert the existing information into actionable knowledge.[19]

Several papers on the relationship between technology and the economy were written by researchers at the International Institute for Applied Systems Analysis (IIASA). A concise version of Kondratiev cycles can be found in the work of Robert Ayres (1989) in which he gives a historical overview of the relationships of the most significant technologies.[20] Cesare Marchetti published on Kondretiev waves and on the diffusion of innovations.[21][22] Arnulf Grübler's book (1990) gives a detailed account of the diffusion of infrastructures including canals, railroads, highways and airlines, with findings that the principal infrastructures have midpoints spaced in time corresponding to 55-year K wavelengths, with railroads and highways taking almost a century to complete. Grübler devotes a chapter to the long economic wave.[23] In 1996, Giancarlo Pallavicini published the ratio between the long Kondratiev wave and information technology and communication.[24]

Korotayev et al. recently employed spectral analysis and claimed that it confirmed the presence of Kondratiev waves in the world GDP dynamics at an acceptable level of statistical significance.[2][25] Korotayev et al. also detected shorter business cycles, dating the Kuznets to about 17 years and calling it the third harmonic of the Kondratiev, meaning that there are three Kuznets cycles per Kondratiev.

Leo A. Nefiodow shows that the fifth Kondratieff ended with the global economic crisis of 2000–2003 while the new, sixth Kondratieff started simultaneously.[26] According to Leo A. Nefiodow, the carrier of this new long cycle will be health in a holistic sense—including its physical, psychological, mental, social, ecological and spiritual aspects; the basic innovations of the sixth Kondratieff are "psychosocial health" and "biotechnology".[27]

More recently, the physicist and systems scientist Tessaleno Devezas advanced a causal model for the long wave phenomenon based on a generation-learning model[28] and a nonlinear dynamic behaviour of information systems.[29] In both works, a complete theory is presented containing not only the explanation for the existence of K-Waves, but also and for the first time an explanation for the timing of a K-Wave (≈60 years = two generations).

A specific modification of the theory of Kondratieff cycles was developed by Daniel Šmihula. Šmihula identified six long-waves within modern society and the capitalist economy, each of which was initiated by a specific technological revolution:[30]

• 1. Wave of the Financial-agricultural revolution (1600–1780)
• 2. Wave of the Industrial revolution (1780–1880)
• 3. Wave of the Technical revolution (1880–1940)
• 4. Wave of the Scientific-technical revolution (1940–1985)
• 5. Wave of the Information and telecommunications revolution (1985–2015)
• 6. Hypothetical wave of the post-informational technological revolution (Internet of things/renewable energy transition?) (2015–2035?)

Unlike Kondratieff and Schumpeter, Šmihula believed that each new cycle is shorter than its predecessor. His main stress is put on technological progress and new technologies as decisive factors of any long-time economic development. Each of these waves has its innovation phase which is described as a technological revolution and an application phase in which the number of revolutionary innovations falls and attention focuses on exploiting and extending existing innovations. As soon as an innovation or a series of innovations becomes available, it becomes more efficient to invest in its adoption, extension and use than in creating new innovations. Each wave of technological innovations can be characterized by the area in which the most revolutionary changes took place ("leading sectors").

Every wave of innovations lasts approximately until the profits from the new innovation or sector fall to the level of other, older, more traditional sectors. It is a situation when the new technology, which originally increased a capacity to utilize new sources from nature, reached its limits and it is not possible to overcome this limit without an application of another new technology.

For the end of an application phase of any wave there are typical an economic crisis and economic stagnation. The financial crisis of 2007–2008 is a result of the coming end of the "wave of the Information and telecommunications technological revolution". Some authors have started to predict what the sixth wave might be, such as James Bradfield Moody and Bianca Nogrady who forecast that it will be driven by resource efficiency and clean technology.[31] On the other hand, Šmihula himself considers the waves of technological innovations during the modern age (after 1600 AD) only as a part of a much longer "chain" of technological revolutions going back to the pre-modern era.[32] It means he believes that we can find long economic cycles (analogical to Kondratiev cycles in modern economy) dependent on technological revolutions even in the Middle Ages and the Ancient era.

Kondratiev waves associated with gains in IT and health with phase shift and overlap, Andreas J. W. Goldschmidt, 2004

Long wave theory is not accepted by many academic economists. However, is important for innovation-based, development and evolutionary economics. Yet, among economists who accept it there has been no formal universal agreement about the standards that should be used universally to place start and the end years for each wave. Agreement of start and end years can be +1 to 3 years for each 40- to 65-year cycle.

Health economist and biostatistician Andreas J. W. Goldschmidt searched for patterns and proposed that there is a phase shift and overlap of the so-called Kondratiev cycles of IT and health (shown in the figure). He argued that historical growth phases in combination with key technologies does not necessarily imply the existence of regular cycles in general. Goldschmidt is of the opinion that different fundamental innovations and their economic stimuli do not exclude each other as they mostly vary in length and their benefit is not applicable to all participants in a market.[33]

• Business cycles
• Clustering illusion
• Grand supercycle (Ralph Nelson Elliott's wave theory)
• Joshua S. Goldstein
• Kuznets swing
• Market trends
• Martin A. Armstrong
• Second Industrial Revolution
• Smihula waves
• Spending wave
• Technological revolution

• Archibugi, Daniele; Filippetti, Andrea (2013). Innovation and Economic Crisis Lessons and Prospects from the Economic Downturn. London: Routledge.
• Barnett, Vincent (1998). Kondratiev and the Dynamics of Economic Development. London: Macmillan. ISBN 978-0-312-21048-9.
• Beaudreau, Bernard C. (1996). Mass Production, the Stock Market Crash and the Great Depression. New York, Lincoln, Shanghi: Authors Choice Press.
• Cheung, Edward (2007) [1995]. Baby Boomers, Generation X and Social Cycles, Volume 1: North American Long-waves (PDF). Toronto: Longwave Press. ISBN 978-1-896330-00-6. Archived from the original (PDF) on 2010-12-14. Retrieved 2009-03-06.
• Devezas, Tessaleno (2006). Kondratieff Waves, Warfare and World Security. Amsterdam: IOS Press. ISBN 978-1-58603-588-4.
• Freeman, Chris; Louçã, Francisco (2001). As Time Goes By. From the Industrial Revolutions to the Information Revolution. Oxford: Oxford University Press. ISBN 978-0-19-924107-1.
• Goldstein, Joshua (1988). Long Cycles: Prosperity and War in the Modern Age. New Haven: Yale University Press. ISBN 978-0-300-03994-8.
• Grinin, L.; Munck, V. C. de; Korotayev, A. (2006). History and mathematics: Analyzing and Modeling Global Development. Moscow: URSS. ISBN 978-5-484-01001-1.
• Grinin, L., Korotayev, A. and Tausch A. (2016) Economic Cycles, Crises, and the Global Periphery. Springer International Publishing, Heidelberg, New York, Dordrecht, London, ISBN 978-3-319-17780-9; https://www.springer.com/de/book/9783319412603
• Hobsbawm, Eric (1999). Age of Extremes: The Short Twentieth Century 1914–1991. London: Abacus. ISBN 978-0-349-10671-7.
• Korotayev; Andrey, V.; Tsirel, Sergey V. (2010). "A Spectral Analysis of World GDP Dynamics: Kondratieff Waves, Kuznets Swings, Juglar and Kitchin Cycles in Global Economic Development, and the 2008–2009 Economic Crisis". Structure and Dynamics. 4 (1): 3–57.
• Kohler, Gernot; Chaves, Emilio José (2003). Globalization: Critical Perspectives. Hauppauge, New York: Nova Science Publishers. ISBN 978-1-59033-346-4. With contributions by Samir Amin, Christopher Chase Dunn, Andre Gunder Frank, Immanuel Wallerstein.
• Lewis, W. Arthur (1978). Growth and Fluctuations 1870–1913. London: Allen & Unwin. pp. 69–93. ISBN 978-0-04-300072-4.
• Mandel, Ernest (1964). "The Economics of Neocapitalism". The Socialist Register.
• Mandel, Ernest (1980). Long waves of capitalist development: the Marxist interpretation. New York: Cambridge University Press. ISBN 978-0-521-23000-1.
• McNeil, Ian (1990). An Encyclopedia of the History of Technology. London: Routledge. ISBN 978-0-415-14792-7.
• Marchetti, Cesare (1986). "Fifty-Year Pulsation in Human Affairs, Analysis of Some Physical Indicators". Futures. 18 (3): 376–388. doi:10.1016/0016-3287(86)90020-0.
• Modis, Theodore (1992). Predictions: Society's Telltale Signature Reveals the Past and Forecasts the Future. New York: Simon & Schuster. ISBN 978-0-671-75917-9.
• Nyquist, Jeffrey (2007). "Cycles of History, Boom and Bust". San Diego: Financial Sense. Archived from the original on 2009-01-10. Retrieved 2009-04-30. Weekly Column from 11.09.2007 predicting a major turning-point between 2007 and 2009 and the start of a Great Depression.
• Nefiodow, Leo A. & Simone (2014). The Sixth Kondratieff. The New Long Wave of the Global Economy. Charleston. ISBN 978-1-4961-4038-8.
• Giancarlo, Pallavicini (1996). La teorizzazione dei cicli lunghi dell'economia, secondo Kondratiev, e l'informatica e la comunicazione. Agrigento: Accademia di Studi Mediterranei Press.
• Rothbard, Murray (1984). The Kondratieff Cycle: Real or Fabricated?. Ludwig von Mises Institute.
• Silverberg, Gerald; Verspagen, Bart (2000). Breaking the Waves: A Poisson Regression Approach to Schumpeterian Clustering of Basic Innovations. Maastricht: MERIT. Archived from the original on 2011-07-24. Retrieved 2010-07-11.
• Šmihula, Daniel (2009). "The waves of the technological innovations of the modern age and the present crisis as the end of the wave of the informational technological revolution". Studia Politica Slovaca. Bratislava: in Studia politica Slovaca, 1/2009 SAS: 32–47. ISSN 1337-8163.
• Šmihula, Daniel (2011). "Long waves of technological innovations". Studia Politica Slovaca. Bratislava: in Studia politica Slovaca, 1/2011 SAS: 50–69. ISSN 1337-8163.
• Solomou, Solomos (1989). Phases of Economic Growth, 1850–1973: Kondratieff Waves and Kuznets Swings. Cambridge: Cambridge University Press. ISBN 978-0-521-33457-0.
• Tausch, Arno; Ghymers, Christian (2007). From the 'Washington' Towards a 'Vienna Consensus'? A Quantitative Analysis on Globalization, Development and Global Governance. Hauppauge, New York: Nova Science Publishers. ISBN 978-1-60021-422-6.
• Tausch, Arno (2013). The Hallmarks of Crisis: A New Center-Periphery Perspective on Long Cycles. Connecticut: REPEC/IDEAS.
• Turchin, Peter (2006). History & Mathematics: Historical Dynamics and Development of Complex Societies. Moscow: KomKniga. ISBN 978-5-484-01002-8.
• The Kondratieff Wave. Dell Publishing Co. Inc. New York, N.Y., USA. 1972. p. 198.
• Shuman, James B.; Rosenau, David (1972). The Kondratieff Wave. The Future of America Until 1984 and Beyond. New York: Dell. This book provides the history of the many ups and downs of the economies.
• Tylecote, Andrew (1991). The Long Wave in the World Economy: The Current Crisis in Historical Perspective. London and New York: Routledge.
• Kondratieff Waves almanac
• Nefiodow, Leo A. (2014). Health: The Economic Growth Engine of the 21st Century, HealthManagement.org Vol 14 Issue 4/2014
• Béla Sipos: „Empirical research of long-term cycles”. STATISZTIKAI SZEMLE [Statistical Survey] 75: 1. ksz. pp. 119-128., Bp., 1997.[1]
• Béla Sipos „Analysis of long-term tendencies in the world economy and Hungary”. STATISZTIKAI SZEMLE [Statistical Survey] 80: Klnsz pp. 86-102. 2002. [2]

• "Kondratieff waves" on faculty.Washington.edu (The Evolutionary World Politics Homepage).
• "Kondratieff theory explained" on Kondratyev.com (Kondratyev Theory Letters).
• The Kondratieff Cycle: Real or Fabricated? by Murray Rothbard