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Drawing on Harrod, Kalecki and Kaldor, this paper seeks to revive the view that  ceteris paribus  firms reduce investment if they have already built up high capacities relative to their assessment of the normal market potential. This reaction establishes a fundamental stabilizing mechanism for the economy. The paper adapts the idea to the growth context of a neo-Kaleckian baseline model, where its destabilizing Harrodian sentiment adjustments are specified in a canonical and microfounded way that introduces a natural nonlinearity into the global dynamics. Supposing local instability, the resulting two-dimensional system is shown to generate persistent self-sustaining cyclical behaviour. In addition, the model is numerically calibrated to period and amplitude of the US business cycle. On the whole, based on an old and almost forgotten conception, the paper advances a most elementary approach to business cycle modelling.

An elementary business cycle mechanism: learning from Harrod and Kaldor