Abstract
How macroeconomic policy activism influences business cycles remains a major unresolved question. This paper compares the degree of cyclical stability in industrialized countries over three periods (1870–1913, 1922–1937 and 1950–1979), two of which were little affected by demand management, while the third saw a large degree of policy involvement. The evidence shows that the 1950–1979 years were unprecedently stable. Neither problems of data reliability, nor the influence of the world cycle, nor the smaller role of agriculture appear to be responsible for this. The major reason seems to be the greater influence of government which operated via automatic and discretionary policies and by changing expectations.
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