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Perhaps the most striking feature of business cycles is that their amplitude varies widely from era to era and from country to country. Although there do seem to be striking regularities in the pattern of covariation exhibited by variables connect. ed with the business cycle, there are large changes in the magnitude of the cycle itself. These differences in cyclical variation should properly be a subject of study by economists. The existence of these differences suggests that" universal" models of business cycles-models that neglect institutional determinants of business cycle behavior-· will not be adequate to explain the phenomenon of the business cycle. This paper extends discussions by Burns (1960) and Baily (1978) of the changing extent of cyclical variability in the American economy. We seek to link this changing variability to changing institutional factors. In the process, we are led to a view of the role of price flexibility …