The Political Business Cycle, 50 Years On

With the Fed utterly clueless about inflation and GDP ticking lower, the Trump administration may be in trouble come midterms. As political narratives start to spin up, it’s worth recalling the nature of the so-called “Political Business Cycle.”

The following article was originally published by the Mises Institute. The opinions expressed do not necessarily reflect those of Peter Schiff or SchiffGold.

April 2025 marks the 50th anniversary of the publication of Yale University economist William D. Nordhaus’s “The Political Business Cycle” (April 1975) in The Review of Economic Studies. This important article not only formally defined a new exogenous hazard to market performance at a time when markets were repeatedly denigrated as inherently unstable, it identified intrinsic tendencies in democratic political systems to manipulate the performance of economies to the benefit of incumbent politicians, especially to influence elections for the retention of political power.