What Is an Economic Cycle? : Looking at Different Definitions

This article is not financial advice, just a collection of past information and does not guarantee or predict anything in the future.

An economic cycle (or business cycle) is the natural rise and fall of economic activity over time. Almost every country experiences periods of growth (expansion) followed by periods of slowdown or decline (contraction), then recovery again. These waves are as old as modern economies themselves, but the way we, as human, define and measure them has changed dramatically over the past 250 years.

Here are the main historical versions of the economic cycle and how our understanding has evolved.

1. Pre-1850: Trade and Harvest Cycles (18th–early 19th century)

Length: 3–8 years
Main driver: Agriculture, weather, wars, and trade disruptions
Who noticed it: Early political economists like William Jevons relate sunspots to harvest failures that caused booms and busts in Britain.

Example:
1815–1819 post-Napoleonic War depression → 1825 UK banking panic → 1836–1839 recovery → 1847 railway crash.

2. The Classical “Juglar Cycle” (1850s–1900s)

Named after: French doctor Clément Juglar (1862)
Length: 7–11 years
Focus: Fixed investment booms (railways, factories, canals) → overbuilding → banking crises → liquidation → recovery
He may be the first noted person to systematically study bank balance sheets and prove cycles were real, not random.

Example:
Panic of 1873 (railway bubble burst) → Long Depression until 1879 → recovery in the 1880s → Panic of 1893 → Panic of 1907.

3. The Kitchin Inventory Cycle (1920s)

Named after: Joseph Kitchin (1923)
Length: 3–5 years (minor cycle)
Cause: Companies over-stock or under-stock inventory based on sales forecasts → when they misjudge, they cut or increase production sharply.

Still used today by central banks to explain short-term fluctuations inside longer cycles.

4. The Kuznets “Infrastructure” or Building Cycle (1930)

Named after: Simon Kuznets (later Nobel winner)
Length: 15–25 years
Driver: Construction and infrastructure waves (railroads → suburbs → highways → urban renewal).

Example:
U.S. housing and railway booms in the 1830s–50s, then again in the 1950s–70s suburban explosion.

5. The Kondratiev Long Wave (1920s – still debated)

Named after: Soviet economist Nikolai Kondratiev (1925)
Length: 45–60 years
Idea: Major technological revolutions create super-long upwaves followed by downwaves.
1st wave: Industrial Revolution & steam (1780s–1840s)
2nd: Railways & steel (1850s–1890s)
3rd: Electricity, chemicals, automobiles (1900s–1940s)
4th: Oil, electronics, aviation (1950s–1980s)
5th (debated): Information technology & internet (1990s–??)

It is said that Kondratiev was sent to the Gulag by Stalin for suggesting capitalism could have long periods of renewal.

6. The Modern “Business Cycle” – NBER Definition (1940s–today)

Used by: National Bureau of Economic Research (U.S.) and most central banks
Definition: “A cycle consists of expansions occurring at about the same time in many economic activities, followed by similarly general recessions, contractions, and recoveries.”
No fixed length – average U.S. expansion since 1945 is about 5–6 years, recessions 11 months.

Official U.S. examples (NBER dates):

December 2007 – June 2009 (Great Recession)
February 2020 – April 2020 (COVID recession – shortest on record)
Current expansion ongoing since May 2020 (longest in history until broken).

7. The Four Classic Phases Everyone Learns Today

Regardless of length, almost every cycle is described using these four stages:

Expansion / Recovery
Rising GDP, falling unemployment, rising confidence, credit easy, stocks and property rise.
Peak
Economy at maximum output, inflation often rising, central banks start tightening.
Contraction / Recession
GDP falls for two consecutive quarters (common rule-of-thumb definition), unemployment rises, profits fall.
Trough
Bottom of the cycle – activity stabilizes, central banks cut rates, recovery begins.

Real Recent Examples (2020–2025)

2020: Sharp COVID trough (global GDP -3.4 %)
2021–mid-2022: Extremely fast recovery (supply-chain rebound + stimulus)
Late 2022–2023: “Soft landing” attempt in U.S. – growth slowed but no official recession
2024–2025: Many analysts expect a mild slowdown or short recession as high interest rates bite with a lag.

The Bottom Line

Economic cycles have always existed, but our explanation of them keeps evolving:

18th century → weather & war
19th century → investment booms & banking crises
20th century → inventory swings + infrastructure + technology waves
21st century → central bank policy, global supply chains, and pandemics
Maybe there will be more change coming in the next century? Who knows?

The length and causes change with each era, but the basic pattern — growth → overconfidence → correction → renewal — has repeated for at least 250 years and shows no sign of disappearing.