The fundamental force that drives 54-year Kondratieff Long Economic Waves is the same force that drives us as individuals, i.e. the relative intensity of our vitality over our lifetimes. This fundamental force in the aggregate drives the fluctuation in aggregate economic data over the long term. The differences in the relative aggregate intensity of the population's vitality (and the relative aggregate intensity of the population's leadership cadre's vitality) over time create a regime, "The Aggregate Virtual Working Life Tenure," whose vitality fluctuates within a range of two fundamental extremes, vigor and torpor, driving economic phenomena that we have all heard familiarly described as vigorous or torpid or perhaps another descriptive term to represent a point within the range.

This regime, "The 54-Year Aggregate Virtual Working Life Tenure" describes the natural change in intensity of vitality that occurs collaterally with the changing age distribution of the population (and the changing age distribution of the population's leadership cadre.) At about 54 years in a working life tenure the population's (and the population's leadership cadre's) intensity of vitality is finally diminished to torpor, the old blood dies out naturally ending the old regime allowing the new blood and their new regime of vigorous vitality to hold sway.

Economics in the British/American tradition made a wrong turn at Ricardo/Malthus. Things would be clearer had we followed the thread of thought from Smith through Malthus and Keynes rather than through Ricardo and his successors. Malthus' demand depression is rooted; I believe, in his original, fundamental idea of "intensity of demand." Had he lived long enough, I think, he would have seen his idea of "intensity" as the cause of the Long Economic Wave.

With help from Malthus, I view the 24-year Kondratieff upslope as the "Intensity Upslope" and the 30-year Kondratieff downslope as the "Disintensity Downslope."

The 54-Year Economic Longwave is just the manifestation of the underlying relative "intensity" of human vitality over The 54-Year "Aggregate Virtual Working Life Tenure."

Schumpeter's Clue: A major clue that the cause of Kondratieff Long Economic Waves is population dynamics comes from Joseph A. Schumpeter in his 1939 book "Business Cycles" [1]. In his introductory Chapter 1, he says, "We need not stay to explain why, for any country, business fluctuations in another country should be looked on as external factors. But to treat in this way variations in the number and age distribution of populations is less easy to justify. . . . we shall not deal with this group of problems in this volume although the writer is alive to the seriousness of this breach in our wall . . ." Then in Footnote 1 below, Schumpeter explains "Readers will see that our arrangements about the element of population are partly motivated by factual propositions and partly by considerations of expository convenience arising out of the purposes of this book. It is not, of course, held that those arrangements would be satisfactory outside of these purposes or that the subject of population has no claim to other treatment than is given to it here. Work done by Dr. A. Losch, Bevolkerungswellen und Wechsellagen, 1936, has even shaken the writer's conviction, which used to be strong, that changes in population have no place among the causal factors of economic cycles."

Further on in Chapter 2, Section D, Schumpeter says "For our present argument we may thus visualize an economic process which merely reproduces itself at constant rates: a given population, not changing in either numbers or age distribution, . . . The tastes (wants) of households are given and do not change."

Thus, it appears that Schumpeter knowingly continued to treat population dynamics as an external factor for his own "expository convenience" despite his new realization that changes in population had a "place among the causal factors of economic cycles." To his credit he declared his misgivings acknowledging "a breach in our wall" and his own "shaken . . . conviction." POPULATION DYNAMICS IS A CAUSE OF ECONOMIC CYCLES!

Malthus' Insight: Probably, the most original indication as to the cause of business cycles and longwaves comes from Thomas Robert Malthus. His discussion of

"Intensity of Demand," found in his "Principles" of 1836 [2], lays the foundation for the idea of the "demand depression."

On page 63, Malthus says, "Demand has been defined as the will to purchase, combined with the means of purchasing. The greater the degree of this will, and of the means of purchasing when directed to any particular commodity wanted, the greater or the more intense may said to be the demand for it. . .

"If a given number of commodities attainable by labour alone, were to become more difficult of acquisition, as they would evidently not be obtained unless by means of increased exertion, we might merely consider such increased exertion, if applied, as an evidence of a greater intensity of demand, or of a will and power to make a greater sacrifice in order to obtain them.

"In the same manner, if while money is considered as of the same value, certain commodities, either from scarcity, or the greater cost of production become more difficult of acquisition, as they will certainly not be acquired except by those who are willing and able to sacrifice a greater amount of money in order to obtain them, such sacrifice, if made, must be considered as an evidence of greater intensity of demand.

"In fact, it may be said, that the giving a greater price for a commodity, while the difficulty of obtaining money remains the same, necessarily implies a greater intensity of demand; and that the real question is, what are the causes which determine the increase or diminution of this intensity of demand, which shows itself in a rise or fall of prices.

"It has been justly stated that the causes which tend to raise the price of any article estimated in some commodity named, and supposed, for short periods, not essentially to vary in the difficulty of production, or the state of supply compared with the demand, are, an increase in the number, wants, and means of the demanders, or a deficiency in the supply; and the causes which lower the price are a diminution in the number, wants and means of the demanders, or an increased abundance in its supply.

"Now the first class of these causes is obviously calculated to call forth the expression of a greater intensity of demand, and the other of a less. . . .

Then in a footnote starting on page 65, Malthus comments on his amplification of Adam Smith's idea of Effectual Demand. "Adam Smith says, that 'when the quantity of any commodity which is brought to market falls short of the effectual demand, all those who are willing to pay the whole value of the rent, wages, and profits, which must be paid in order to bring it thither, cannot be supplied with the quantity which they want. Rather than want it altogether some of them will be willing to give more.' Now this willingness, on the part of some of the demanders, to make a greater sacrifice than before, in order to satisfy their wants, is what I have called a greater intensity of demand. As no increase of price can possibly take place, unless the commodity be of such a nature as to excite in a certain number of purchasers this species of demand, and as this species of demand must always be implied whenever we speak of demand and supply as determining prices, I have thought that it ought to have a name. It is essentially different from effectual demand, which, as defined by Adam Smith, is the quantity wanted by those who are willing and able to pay the natural price; and this demand will of course be the greatest when the natural price is least. But the increased intensity of demand, when actually called forth, uniformly implies an increased value offered, compared with the quantity of the commodity supplied, and is equally applicable to an article which is accidentally scarce, and one which has increased its natural price. It is invariably and exclusively the intensity of demand, and not the effectual demand, which is referred to, when it is said, and correctly, that the prices of commodities vary as the demand directly, and the supply inversely."

On page 69, Malthus concludes emphatically "It is in the nature of things absolutely impossible that any demand, in regard to extent [of consumption], should raise prices, unaccompanied by a will and power on the part of the demanders to make a greater sacrifice, in order to satisfy their wants."

So then it is Malthus, with his synthesis of the idea of "Intensity of Demand" who pinpoints the cause of price fluctuations. The increase or diminution of "Intensity of Demand" which drives the increase or decrease in prices is a function of the increase or diminution in the number, wants and means of the demanders. The ability of demanders to make sacrifices or increase exertion to satisfy their wants drives prices up. The inability of demanders to make sacrifices or increase exertion will drive prices down.

PRICE FLUCTUATIONS ARE DRIVEN BY POPULATION DYNAMICS!

Malthus' recognized that intensity, the ability or inability of demanders to increase exertion or make sacrifices, is at the bottom of price fluctuations. Schumpeter conceded that the number and age distribution of populations was a causal factor of economic cycles. Both were talking about the same thing: the relative intensity of the vitality of the population over time. Applied to the long economic wave, the relative intensity of the population's vitality becomes manifest in a 54-year regime I call "The Aggregate Virtual Working Life Tenure."

The Deer and the Beaver: Adam Smith in "The Wealth of Nations," [3] Chapter 6, discusses the component parts of the price of commodities. On page 47, Smith says, "In that early and rude state of society which precedes both the accumulation of stock and the appropriation of land, the proportion between the quantities of labor necessary for acquiring different objects seems to be the only circumstance which can afford any rule for exchanging them one for another. If among a nation of hunters, for example, it usually costs twice the labour to kill a beaver which it does to kill a deer, one beaver should naturally exchange for or be worth two deer. It is natural that what is usually the produce of two days or two hours labor, should be worth double of what is usually the produce of one day's or one hour's labor." To Smith, quantity of labor is the original rule of value.

For our illustration let us return to Smith's original early and rude state of society and his nation of hunters and admit the existence of just one variable, which by law of nature had to be present and must affect the cost of labor. This natural variable is the relative intensity of the vitality of the hunters over time. When the hunters are young and vigorous, for example, it might take two hours to kill a deer and four hours to kill a beaver. But, when the hunters are old and torpid it might take three hours to kill a deer and six hours to kill a beaver. In both cases, one beaver would exchange for or be worth two deer. In the second case, however, there would be a lot less to go around. The vitality of the working population has become disintense leading to both a reduction in the demand for and the supply of deer and beaver.

"The Aggregate Virtual Working Life Tenure" fits neatly into Smith’s foundational thinking at the earliest and simplest level. Just by just adding population age dynamics to his simple equation -- dramatic change to this original rule of value can be seen.

The Propensity to Consume and the Inducement to Invest: John Maynard Keynes in the preface to "The General Theory of Employment, Interest and Money" [4] states that his main purpose is to deal with the difficult questions of orthodox economic theory, the lack of clearness and of generality in the premises, and to re-examine certain basic assumptions.

Later in the preface he acknowledges that in his earlier work the "Treatise on Money," he "failed to deal thoroughly with the effects of changes in the level of output. My so-called 'fundamental equations'" he said, " were an instantaneous picture taken on the assumption of a given output" -- the classical Ricardian way of looking at the economy, as a snapshot frozen in time. . . . "But the dynamic development, as distinct from the instantaneous picture, was left incomplete and extremely confused. This book . . . is primarily a study of the forces which determine changes in the scale of output and employment as a whole; . . . our method of analysing . . . is one which depends on the interaction of supply and demand, and is in this way linked up with our fundamental theory of value. We are thus led to a more general theory, which includes the classical theory with which we are familiar, as a special case. . . . The ideas which are here expressed so laboriously are extremely simple and should be obvious."

What Keynes says drives the whole economic dynamic are two fundamental forces -- the propensity to consume on the part of demanders and the inducement to invest on the part of suppliers.

According to Keynes what drives changes in the propensity to consume are fear and confidence. The inducement to invest, he says, is driven by "animal spirits."

In Keynesian terms, during the more vigorous 24-year Kondratieff "Intensity Upslope" of the Long Economic Wave the demanders are confident and the suppliers' "animal spirits" are high. Over the more torpid 30-year Kondratieff "Disintensity Downslope" the demanders are fearful and the suppliers' animal spirits are low.

Ricardian Classical theory as a special case where Say's Law applies and supply creates demand may very well be valid in a Kondratieff upslope, but it is Malthus' recognition of demanders' inability to increase exertion or make sacrifices that drives the Kondratieff downslope.

THUS, IT NOW CAN BE SEEN that these contributors have been moving toward -- without quite realizing it-- the recognition of the natural 54-year "Aggregate Virtual Working Life Tenure" as the force that drives the long economic wave.

References:

(1) Schumpeter, Joseph A., "Business Cycles, A Theoretical, Historical and Statistical Analysis of the Capitalist Process" Abridged from the 1939 edition with an introduction by Rendig Fels, McGraw-Hill, 1964

(2) Malthus, Thomas Robert, "Principles of Political Economy" 2nd Edition, 1836, W. Pickering, London, reprinted 1986 by Augustus M. Kelley, Publishers, Fairfield, NJ 07006

(3) Smith, Adam, "An Inquiry into the Nature and Causes of The Wealth of Nations" The Modern Library Edition, New York, 1937

(4) Keynes, John Maynard, "The General Theory of Employment, Interest and Money" Harcourt Brace Jovanovich, New York, First Harvest/HBJ Edition 1964

ADDENDUM #1, "EMAIL TO TESSALENO"

To: Tessaleno Devezas

From: James T. Corredine

Date: 7 April 1998

Re: XIV Word Congress of Sociology - Montreal 1998

Sociocybernetic Research Committee

Socioeconomic Longwaves and Future Scenarios Session

"The Aggregate Virtual Working Life Tenure."

Subject: "Palm Sunday Brainstorming - 1998"

Dear Tessaleno,

This past Palm Sunday was spent visiting with my sister and her family in New Jersey and brainstorming the work of August Losch with my brother-in-law and nephew.

My brother-in-law Nick LaRocca works for the Army as a computer engineer but is trained as a physicist. My precocious nephew is pursuing a career as a stand-up comic. Both have been following the development of my theory since 1986.

Nick explained to me your quote "Economic parameters, like prices, production, money, stock markets, etc... are only a very superficial manifestation of a deeper stratum where the real causes are to be looked for!" like this...

He explained that Physics is the fundamental bedrock for the hard sciences. Chemistry in turn is built on this foundation and forms a strata upon which Biology, in turn, is based. He said that if we can solidify the line from Biology to Economics it becomes unnecessary to explain Economics in terms of Physics or Chemistry and that the link to Biology is enough to connect economics to the hard sciences.

I was able to locate two of August Losch's works published in English language journals. "Population Cycles as a Cause of Business Cycles" Quarterly Journal of Economics, 1936-37, 51, 649-62 and "The Nature of Economic Regions" Southern Economic Journal, 1938 5(1), 71-8.

Based on my brother-in-law's insight and after Palm Sunday dinner the three of us brainstormed "Population Cycles," Losch’s work available in English most closely related to "Bevolkerungswellen und Wechsellagen," 1936 as cited by Schumpeter.

(Tessaleno... Since your second language is German, it would be very helpful if you can locate "Bevolkerungswellen und Wechsellagen," and digest it. It seems to us that it is probably more complete and better written than what we have available to us in English.)

Fundamentally, what Losch says is that because generations are at their time of highest fertility at age 33 it follows that regular 33-year fertility cycles must underlie population waves. Losch describes data that show a centennial pattern of great fertility waves that occur every third fertility cycle. This makes sense. If each succeeding 33-year cycle were of equal intensity they wouldn't fit the longwaves. If each second 33-year cycle were of equal intensity, they still wouldn't fit the waves. Only if Losch is right, that a great centennial fertility wave occurs every third 33-year fertility cycle do we have close coincidence with longwaves. It appears then that we can say, for the sake of illumination, that one of Losch's centennial waves drives two Kondratieffs or two "Aggregate Virtual Working Life Tenures."

Applying this knowledge to what we know about the longwave, it appears that the fifth Kondratieff, which will start around 2004 and run to 2058 WILL NOT be driven by one of Losch's great centennial fertility surges as was the case with the fourth Kondratieff which started in 1950. This longwave driven by the post-war baby boom engendered the largest economic expansion in the history of the world. Those expecting a replay or repeat of the intensity of the fourth wave may be disappointed. If Losch is right the next great population wave will begin around 2050 approximately coincident with the sixth Kondratieff which would start around 2058. It is then that a great expansion will occur. To confirm our perception we discussed the historical economic events around the second Kondratieff that began approximately about 1843 and would coincide with a Losch centennial fertility surge. In the United States the great struggle for the future of the country was undertaken. The Civil War was fought by young conscripts to clear the way for the massive industrialization of America of the second Kondratieff.

To get an idea of the fifth Kondratieff it is probably instructive to look at the third Kondratieff, which again WAS NOT driven by a great centennial fertility surge (but by immigration as needed). This was the Progressive Era, an era of consolidation, city building, the era of the big trusts. It is likely that the fifth Kondratieff or "Aggregate Virtual Working Life Tenure" will be more like this.

It seems to us then that the two biological springs for the longwave are the generative 33-year fertility cycle and the limiting 54-year "Aggregate Virtual Working Life Tenure."

These two natural biological clocks interacting together create the long economic wave.

We think that it is in this area that future work on the longwave should be concentrated.

Respectfully Yours,

James