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The primary aim of this study is to present a theory of business cycles and their secular evolution, elaborated within a dynamic model of capitalist production. We will show that this model can produce a number of distinct "regimes" such as balanced growth, overheating, stagnating growth, or crises. The business cycle will be interpreted as a short-run sequence of such regimes. This theory allows us to differentiate between various stages in the actual evolution of business cycles in the history of capitalism, from the traditional XIXth century pattern to the contemporary phenomena which we observe today. This ability to make historical differentiations is a major advance over previous attempts to model the business cycle which have treated every historical stage in the evolution of the business cycle as equivalent. Finally, we link this evolution of the business cycle to Marx's law of the tendency for the rate of profit to fall, and formulate a corollary to this law which we will call "the law of increasing instability".

Although the analysis of crises presented below is not directly derived from the work of Smith, Ricardo, or even Marx, we nevertheless contend that it is classically inspired in the sense that it is based on a dynamic model whose assumptions are classical, and because it clarifies many aspects of Marx's view of business cycles in relation to the law of the tendency for the rate of profit to fall. In particular, it provides an answer to the difficult question, "Why does profitability matter?"

Our framework of analysis was developed in a previous study of the classical analysis of competition and the formation of prices of production (Duménil-Lévy 1983

G. Duménil, D. Lévy, "The Real and Financial Determinants of Stability: The Law of the Tendency Toward Increasing Instability, pp. 87-115", 1989, in W. Semmler, Financial Dynamics and Business Cycles: New Perspectives, Sharpe : Armonk, New York; London, England.

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