Sunspot Theories of Fluctuations

Early in the nineteenth century, analysts of fluctuations began to examine the role of commercial moods in the business cycle. By the second half of the century, economists sought the explanation for alterations in moods. William Stanley Jevons attributed such alterations to the periodic alteration in harvests due to sunspots. The sunspot cycle impinged on the economy both directly (as the harvest fluctuation altered aggregate demand), and indirectly (as the harvest fluctuation changed investors\u27 expectations). By contrast, business-cycle theorists have recently developed theories of cycles in which sunspots refer to phenomena that, by themselves, do not affect the economy. However, as long as sunspots alter beliefs, cyclical economic effects result