" Kondratiev Wave is a long-term economic cycle in commodity prices and other prices, believed to result from technological innovation, that produces a long period of prosperity alternating with economic decline. This theory was founded by Nikolai D. Kondratiev (also spelled "Kondratieff"), an agricultural economist who noticed agricultural commodity and copper prices experienced long-term cycles. Kondratiev believed that these cycles involved periods of evolution and self-correction." (https://www.investopedia.com/terms/k/kondratiev.asp)
From the Wikipedia: "Characteristics of the cycle
Kondratiev identified three phases in the cycle, namely expansion, stagnation and recession. More common today is the division into four periods with a turning point (collapse) between expansion and stagnation.
Writing in the 1920s, Kondratiev proposed to apply the theory to the 19th century:
- 1790–1849, with a turning point in 1815.
- 1850–1896, with a turning point in 1873.
Kondratiev supposed that in 1896 a new cycle had started.
The technological cycles can be labeled as follows:
- Industrial Revolution (1771)
- Age of Steam and Railways (1829)
- Age of Steel and Heavy Engineering (1875)
- Age of Oil, Electricity, the Automobile and Mass Production (1908)
- Age of Information and Telecommunications (1971)
"A specific modification of the theory of Kondratieff cycles was developed by Daniel Šmihula. Šmihula identified six long-waves within modern society and the capitalist economy, each of which was initiated by a specific technological revolution:[
1. Wave of the Financial-agricultural revolution (1600–1780)
2. Wave of the Industrial revolution (1780–1880)
3. Wave of the Technical revolution (1880–1940)
4. Wave of the Scientific-technical revolution (1940–1985)
5. Wave of the Information and telecommunications revolution (1985–2015)
6. Hypothetical wave of the post-informational technological revolution (Internet of things/renewable energy transition?) (2015–2035?)
Unlike Kondratieff and Schumpeter, Šmihula believed that each new cycle is shorter than its predecessor. His main stress is put on technological progress and new technologies as decisive factors of any long-time economic development. Each of these waves has its innovation phase which is described as a technological revolution and an application phase in which the number of revolutionary innovations falls and attention focuses on exploiting and extending existing innovations. As soon as an innovation or a series of innovations becomes available, it becomes more efficient to invest in its adoption, extension and use than in creating new innovations. Each wave of technological innovations can be characterized by the area in which the most revolutionary changes took place ("leading sectors").
From the Wikipedia:
"Since the inception of the theory, various studies have expanded the range of possible cycles, finding longer or shorter cycles in the data. The Marxist scholar Ernest Mandel revived interest in long-wave theory with his 1964 essay predicting the end of the long boom after five years and in his Alfred Marshall lectures in 1979. However, in Mandel's theory there are no long cycles, only distinct epochs of faster and slower growth spanning 20–25 years.
In 1996, George Modelski and William R. Thompson published a book documenting K-Waves dating back to 930 AD in China. Separately, Michael Snyder wrote: "economic cycle theories have enabled some analysts to correctly predict the timing of recessions, stock market peaks and stock market crashes over the past couple of decades".
The historian Eric Hobsbawm also wrote of the theory: "That good predictions have proved possible on the basis of Kondratiev Long Waves—this is not very common in economics—has convinced many historians and even some economists that there is something in them, even if we don't know what".
US-economist Anwar Shaikh analyses the movement of the general price level - prices expressed in gold - in the US and the UK since 1890 and identifies three long cycles with troughs ca. in 1895, 1939 and 1982. With this model 2018 was another trough between the third and a possible future fourth cycle.
Some argue that this logic can be extended. The custom of classifying periods of human development by its dominating general purpose technology has surely been borrowed from historians, starting with the stone age. Including those, authors distinguish three different long-term metaparadigms, each with different long waves. The first focused on the transformation of material, including stone, bronze, and iron. The second, often referred to as industrial revolutions, was dedicated to the transformation of energy, including water, steam, electric, and . Finally, the most recent metaparadigm aims at transforming information. It started out with the proliferation of communication and stored data and has now entered the age of algorithms, which aims at creating automated processes to convert the existing information into actionable knowledge.]
Several papers on the relationship between technology and the economy were written by researchers at the International Institute for Applied Systems Analysis (IIASA). A concise version of Kondratiev cycles can be found in the work of Robert Ayres (1989) in which he gives a historical overview of the relationships of the most significant technologies. Cesare Marchetti published on Kondretiev waves and on the diffusion of innovations. Arnulf Grübler's book (1990) gives a detailed account of the diffusion of infrastructures including canals, railroads, highways and airlines, with findings that the principal infrastructures have midpoints spaced in time corresponding to 55-year K wavelengths, with railroads and highways taking almost a century to complete. Grübler devotes a chapter to the long economic wave. In 1996, Giancarlo Pallavicini published the ratio between the long Kondratiev wave and information technology and communication.
Korotayev et al. recently employed spectral analysis and claimed that it confirmed the presence of Kondratiev waves in the world GDP dynamics at an acceptable level of statistical significance. Korotayev et al. also detected shorter business cycles, dating the Kuznets to about 17 years and calling it the third harmonic of the Kondratiev, meaning that there are three Kuznets cycles per Kondratiev.
Leo A. Nefiodow shows that the fifth Kondratieff ended with the global economic crisis of 2000–2003 while the new, sixth Kondratieff started simultaneously. According to Leo A. Nefiodow, the carrier of this new long cycle will be health in a holistic sense—including its physical, psychological, mental, social, ecological and spiritual aspects; the basic innovations of the sixth Kondratieff are "psychosocial health" and "biotechnology".
More recently, the physicist and systems scientist Tessaleno Devezas advanced a causal model for the long wave phenomenon based on a generation-learning model and a nonlinear dynamic behaviour of information systems. In both works, a complete theory is presented containing not only the explanation for the existence of K-Waves, but also and for the first time an explanation for the timing of a K-Wave (≈60 years = two generations).
Every wave of innovations lasts approximately until the profits from the new innovation or sector fall to the level of other, older, more traditional sectors. It is a situation when the new technology, which originally increased a capacity to utilize new sources from nature, reached its limits and it is not possible to overcome this limit without an application of another new technology.
For the end of an application phase of any wave there are typical an economic crisis and economic stagnation. The financial crisis of 2007–2008 is a result of the coming end of the "wave of the Information and telecommunications technological revolution". Some authors have started to predict what the sixth wave might be, such as James Bradfield Moody and Bianca Nogrady who forecast that it will be driven by resource efficiency and clean technology. On the other hand, Šmihula himself considers the waves of technological innovations during the modern age (after 1600 AD) only as a part of a much longer "chain" of technological revolutions going back to the pre-modern era. It means he believes that we can find long economic cycles (analogical to Kondratiev cycles in modern economy) dependent on technological revolutions even in the Middle Ages and the Ancient era. (https://en.wikipedia.org/wiki/Kondratiev_wave)