This PDF is a selection from an out-of-print volume from the NationalBureau of Economic Research

Volume Title: Strategic Factors in Business Cycles

Volume Author/Editor: John Maurice Clark

Volume Publisher: NBER

Volume ISBN: 0-87014-023-X

Volume URL: http://www.nber.org/books/clar34-1

Publication Date: 1934

Chapter Title: Table of contents, introduction

Chapter Author: John Maurice Clark

Chapter URL: http://www.nber.org/chapters/c2314

Chapter pages in book: (p. -17 - 0)

STRATEGIC FACTORS

IN BUSINESS CYCLES

JOHN MAURICE CLARKWITH AN INTRODUCTION BY

THE COMMITTEE ON RECENTECONOMIC CHANGES

A PUBLICATION OF THE

NATIONAL BUREAU OF ECONOMIC RESEARCH

IN COOPERATION WItH THE

COMMITTEE ON RECENT ECONOMIC CHANGES

NEWYORK: 1935

Reprinted 1949

COPYRIGHT, 1934, BY NATIONAL BUREAU OF ECONOMIC RESEARCH, INC.,

1819 BROADWAY, NEW YORK 23, N. Y. ALL RIGHTS RESERVED

Reprinted 1949

AuGusTus M. Kazn, INC.

PUBLISHED BY SPECIAL ARRANGEMENT WITH

NATIONAL BUREAU OF ECONOMIC RESEARCH, INC.

LITHOCRAPHED IN U.S.A.

PUBLICATIONS OF THE

NATIONAL BUREAU OF ECONOMIC RESEARCH,

INC.

NUMBER 24

STRATEGIC FACTORS

IN BUSINESS CYCLES

OFFICERS

1949C. Reinold Noyes, Chairman

H. W. Laidler, PresidentHarry Scherman, Vice-President

George B. Roberts, TreasurerW. J. Carson, Executive Director

Martha Anderson, Editor

DIRECTORS AT LARGE

B. It. Belcher, American Telephone fr Telegraph Co.Oswald W. Knauth, New York City

Simon Kuznets, University of PennsylvaniaH. W. Laidler, Executive Director, League for Industrial Democracy

Shepard Morgan, Finance Adviser, 0MG US, GermanyC. Reinold Noyes, New York City

George B. Roberts, Vice-President, National City BankBeardsley Rumi, New York City

Harry Scherman, President, Book.of-the-Month Club'George Soule, New York City

N. I. Stone, Consulting EconomistJ. Raymond Walsh, WMCA Broadcasting Co.

Leo Wolman, Columbia UniversityT. 0. Yntema, Vice President—Finance, Ford Motor Co.

DIRECTORS BY UNIVERSITY APPOINTMENT

E. Wight Bakke, Yale Gottfried Haberler, HarvardC. C. Balderston, Pennsylvania Clarence Heer, North Carolina

Arthur F. Burns, Columbia It. L. Kozelka, MinnesotaG. A. Elliott, Toronto Paul M. O'Leary, Cornell

H. 1st. Groves, Wisconsin T. W. Schultz, ChicagoIt. B. Warren, Institute for Advanced Study

DIRECTORS APPOINTED BY OTHER ORGANIZATIONS

Percival F. Brundage, American Institute of AccountantsArthur H. Cole, Economic History Association

Frederick C. Mills, American Statistical AssociationS. H. Ruttenberg, Congress of Industrial Organizations

Murray Shields, A inerican Management AssociationBoris Shishkin, American Federation of Labor

Warren C. Waite, American Farm Economic AssociationDonald H. Wallace, American Economic Association

RESEARCH STAFF

Arthur F. Burns, Director of ResearchGeoffrey H. Moore, Associate Director of Research

Moses AbramovitzHarold Barger

Morris A. CopelandDaniel Creamer

David DurandSolomon Fabricant

Milton FriedmanMillard Hastay

W. Braddock Hickman

F. F. HillThor HultgrenSimon KuznetsClarence D. LongRuth P. MackFrederick C. MillsRaymond J. SaulnierGeorge J. StiglerLeo Wolman

National Bureau of Economic Research,

clark, John Maunce, 1884— 2,006,842.

j Strategic factors in business cycles 1by, John Maurice Clark;with an introduction by the Committai on recent economic'

9changes. New York SPrinted by H. Wolff, 1934.

xv v (Hatf4Jtk; Publications of the National bureau ofeconomic research, Inc., no. 24)

'A publication of the National bureau of economic Inwith the Committee on recent economic changa"

I

1. BusInes, cycles. 2. U. t — Econ. coà4lt. — 3. U. Sn-Induij. r. Conference on Washington, D. C., 1021.

• Committee on recent economic changes. ii. Title.

1Library of Congress HIt3711.C53 9

SUBMITTED BY380.124,

INTRODUCTION

BY THE COMMJ flEE ON RECENT ECONOMICCHANGES

IN 1921, in the midst of the early post-War depres-sion, the President of the United States called a na-tional Conference on Unemployment to deal withurgent emergency problems. Out of this Conferencecame a series of important investigations, each spon-sored by committees set up by the Conference.

In 1927 a continuing committee of that Confer-ence was brought together under the chairmanshipof Herbert Hoover, then Secretary of Commerce,designated as "The Committee on Recent EconomicChanges of the President's Conference on Unem-ployment." Its purpose was to make a comprehen-sive fact-and-figure picture of the results of the work-ing of economic forces during a major business cycle,assembled in the form of a descriptive record withstatistical measurements, which should reveal thedeveloping pattern of our economic evolution.

In order that this project might be carried out ina thoroughly scientific spirit, and be utterly freefrom partisan bias, the National Bureau of Eco-nomic Research, Inc. was enlisted by the Committeeto assemble, assimilate and organize the factual andstatistIcal material for study and interpretation. For

v]

STRATEGIC FACTORS IN BUSINESS CYCLESthis undertaking a group of fifteen of the most com-petent economists in the country was assembled bythe National Bureau of Economic Research. To thebroad background knowledge of this collaboratinggroup the National Bureau added its wealth of sta-tistical data and its facilities for progressively meas-uring the operation of economic forces, reflectingthe actions of millions of human beings engaged inthe normal processes of living.

In 1928 Arch W. Shaw succeeded Mr. Hoover asChairman of the Committee on Recent EconomicChanges, and early in '1929 the Committee's firstreport was brought out, a two-volume work coveringthe period from 1922 to 1928, enEitled Recent Eco-nomic Changes in the United States, intended as arecord, partly statistical and partly descriptive, ofthe ascending curve of the cycle which started afterthe depression of 1921 and carried through '928.

When, a year later, the country entered upon thedescending curve of the major cycle under observa-tion, the part that public works might be expectedto play in stabilizing our national economy was en-gaging the attention of thinking men. Inasmuch asthis represented a field where a statistical picturecould be made with reasonable promptness, and onewhich would fit into its broad program, the Com-mittee sponsored a study, which was prepared at theNational Bureau of Economic Research under the

[vi

INTRODUCTIONdirection of Dr. Leo Wolman, and published as Plan-ning and Control of Public Works.

In 1932 the developing pattern of our economicexperience was further disclosed by the publicationof a work by Dr. Frederick C. Mills entitled, Ecoenomic Tendencies in the United States. This book,published cooperatively by the Committee on Re-cent Economic Changes and the National Bureau ofEconomic Research, summarized and extended therecord covered by the two-volume report alreadydescribed. In this work Dr. Mills essayed the im-portant task of bringing out the characteristics ofthe tendencies prevailing during the period preced-ing the current economic depression, in comparisonwith the tendencies prevailing during the periodpreceding the World War. This served to clarifymany economic relationships which had previouslybeen little understood.

In this program the Committee and its collabora-tor, the National Bureau of Economic Research,have been concerned chiefly with making a quanti-tative analysis by means of facts and statistics, pic-turing as they do the movement of commerce andindustry—ships crossing the seas with cargoes ofimports and exports, freight and passenger trainsrumbling across the continent, the daily transactionsin banking houses, stock and produce exchanges,wholesale establishments and retail stores—all repre-senting the reality of life and the relation of industry

viij

STRATEGIC FACTORS IN BUSINESS CYCLESto industry and individual to individual. Withoutsuch a statistical and descriptive record as had beenundertaken, representing the 'measurables' of oureconomic life, little progress could be made in theanalysis or understanding of the motives and opera-tions that underlie and affect the movement of eco-nomic forces.

All statistical measurements must of necessity beon a common basis if comparison is to be possible.In the statistical record compiled over the wholeperiod covered by the Committee's program, what-ever monetary units have been used have been interms of dollars based on a constant relationship togold. Early in 1933 the United States went off thegold basis. The Committee recognized this as anatural stopping point for its undertaking, and itdetermined to bring to a head as rapidly as possibleall of the separate studies which formed its programof publication, thus fulfilling its mission at a timewhen the results would be of the most timely inter-est and service.

In line with this decision, there will follow asrapidly as they can be completed and prepared forthe press, a study of "Profits" by Dr. Ralph C. Ep-stein; a study of "Prices" by Dr. Frederick C. Mills;a report on "Wages and Consumption," by Dr. LeoWolman; a report on "Industrial Trends" by Dr.Willard L. Thorp; and possibly one or more addi-tional reports or surveys.

[viii

INTRODUCTIONMeanwhile, the Committee sponsored a special

study, from the descriptive and statistical recordwhich had been assembled, to endeavor to disclose,so far as might be possible, what factors play an ac-tive role in throwing the economic mechanism outof balance and what factors adapt themselves pas-sively to the changes produced by the active factors.It is this phase of the Committee's exploration whichexplains the present volume. While the statisticaland factual record of the cycle was being made bythe collaborating group of economists, Dr. Clarkwas a regular attendant at the meetings of the group.He participated in the discussions, studied thewealth of factual and statistical material which hadbeen assembled, and assimilated much of the pictureof our economic life which it reflected. Then, view-ing the whole picture objectively, he essayed tomake an appraisal and draw certain conclusions.

The present volume is the result. Intended toachieve a perspective on the pattern of our recenteconomic experience, it shows something of the evolv-ing design and, in careful fashion as becomes a workby so eminent a student of economic theory, exam-ines into the general direction the pattern is taking.

While Dr. Clark is responsible for the conclusionsherein set forth, the Committee on Recent EconomicChanges is pleased to offer this report of his findingsas a valuable and timely contribution to currenteconomic thought. Indeed, the Committee hopes

ix]

STRATEGIC FACTORS IN BUSINESS CYCLESthat it may prove to be helpful in relating yester-day's economic experience to tomorrow's economicneeds. For out of his intensive study of the patternof our recent economic life Dr. Clark has endeavoredto isolate what he terms the "strategic business fac-tors"—strategic because they seem to have a causalinfluence upon the business cycle and are possiblysusceptible of conscious control by the community.Highly suggestive, also, is his analysis of the charac-ter of and requirements for national economic bal-ance, and the discussion of the means and possibilitiesof attaining and maintaining it.

The Committee is glad to have the opportunity ofpresenting an analysis of this character. It is alsoglad to add its emphasis to Dr. Clark's call for animprovement in the quality and quantity of thecountry's statistical services. But it realizes that effec-tive results can be achieved only by putting to workthe results of scientific analysis and continued statis-tical investigation in the realm of practical affairs.What is perhaps more needed at the present timethan anything else is the development of means ofcoordinating and utilizing the experience of men ofaffairs and the results of economic research.

It is the Committee's belief that economic re-search itself is made more fruitful through contactbetween economists and men who are more familiarwith business than with text books, for whateverscientific analysis has to contribute to human wel-

[x

INTRODUCTIONfare must be done through the channel of practicalapplication. Among the things which the Committeeviews with most satisfaction is that its work has madeat least a modest contribution toward the achieve-ment of some such union. In the carrying out of thiswork, it has had the generous support of the Rocke-feller Foundation, the Economic Club of Chicago,the Carnegie Corporation, and various socially-minded groups and individuals, whose support ithere gratefully acknowledges.

Recognizing the timeliness of Dr. Clark's report,the Committee has been led to hasten its publica-tion that it may serve the immediate need of clearerperspective. It is presented, not as a full and maturedex?ression of the Committee's own collective view-point, but as the findings of an able thinker upona broad problem of great significance at the presentjuncture in our social-political-economic life. It leadsup to the great question that we face as a nation:which factors are and which are not amenable topurposive control by public or private agencies?

ARCH W. SHAW, Chairman JoHN J. RASKOBRENICK W. DUNLAP SAMUEL W. REYBURNWILLIAM GREEN Louis J. TABERJULIUS KLEIN , DANIEL WILLARDJOHN S. LAWRENCE CLARENCE M. WOOLLEYMAX MASON OWEN D. YOUNGADOLPH C. MILLER EDWARD E. HUNT,LEWIS E. PIERsoN Secretary

November, 1933xi]

RELATION OF THE DIRECTORS

TO THE WORK OF THE NATIONAL BUREAU.

OF ECONOMIC RESEARCH

j. The object of the National Bureau of Economic Research is to as-certain and to present to the public important economic facts and theirinterpretation in a scientific and impartial manner. The Board of Directorsis charged with the responsibility of ensuring that the work of the Bureauis carried on in strict conformity with this object.

2. To this end the Board of Directors shall appoint one or more Di-rectors of Research.

3. The Director or Directors of Research shall submit to the membersof the Board, or to its Executive Committee, for their formal adoption, allspecific proposals concerning researches to be instituted.

4. No study shall be published until the Director or Directors of Re-search shall have submitted to the Board a summary report drawing atten-tion to the character of the data and their utilization in the study, the natureand treatment of the problems involved, the main conclusions and such otherinformation as in their opinion will serve to determine the suitability of thestudy for publication in accordance with the principles of the Bureau.

A copy of any manuscript proposed for publication shall also be sub-mitted to each member of the Board. If publication is approved each memberis entitled to have published also a memorandum of any dissent or reservationhe may express, together with a brief statement of his reasons. The publicationof a volume does not, however, imply that each member of the Board ofDirectors has read the manuscript and passed upon its validity in every detail.

6. The results of an inquiry shall not be published except with the ap-proval of at least a majority of the entire Board and a two-thirds majorityof all those members of the Board who shall have voted on the proposalwithin the time fixed for the receipt of votes on the publication proposed.The limit shall be forty-five days from the date of the submission of thesynopsis and manuscript of the proposed publication unless the Board cx-tenth the limit; upon the request of any member the limit may be extendedfor not more than thirty days.

A copy of this resolution shall, unless otherwise determined by theBoard, be printed in each copy of every Bureau publication.

(Resolution of October 1926, revised February 6, '933)

CONTENTS

PART ONE

THEORETICAL APPROACH

The Nature of the Study 3Framework of a Theory i

PART TWO

TYPICAL CYCLE PATTERNS

Introduction 23The Factor of Timing

Introduction 26Construction 27Durable Luxury Goods 44Consumers' Goods in General 47Industrial Production and Prices, Employment

and Payrolls 50Stocks of Goods 53Dealings in Securities 56Agricultural Production and Prices 6iForeign Trade 65Banking 68Corporate Incomes 69General Conclusions as to Timing of Series 71

Amplitudes of Fluctuations:Production 73Incomes 79Prices 8gProfits 91

4

CONTENTSPART THREE

GENERAL MOVEMENTS, 1922-1929

Introduction 96The Stock Market 98Construction i 01

Banking 102Fixed Capital 103Corporate Net Incomes io6Employment io8Durable Goods 1 o8

Conclusion iogPART FOUR

SPECIAL FEATURES OF THE LAST CYCLE

Summary 1 11

Non-Cyclical Factors: Post-War Conditions ii6Increase of Durable Goods 1 19

Conditions Bearing on Recovery 121

PART FIVE

ANOTHER APPROACH: THEMEANING AND REQUIREMENTS OF BALANCE

Introduction 124The Meaning of 'Balance' 127Labor and Employment 131

Steady Production: the Individualist Prescription 134Savings and Capital Expenditures 136A Stable Credit System vs. Cumulative

Movements i 38Long-Run Problems of Distribution of Incomes 139

[xiv

CONTENTSNew Goods 143Hours of Labor 144Balance between Savings and Economic

Exploration *

147

Over-Concentrations of Activity i 51

Movements of Prices, Money Values and Profits iOther Points 156Conclusion 158

PART SIX

THE STRATEGIC FACTORS

Factors of Prediction vs. Factors of Diagnosis i 6oCauses: A Partial Theory of Business Cycles 167Factors of Controlling ImportanceFirst Group: Originating Causes 184Second Group: Business Responses Controlling

the Short Cycle 187Possibilities of Control as Guides to Strategic

Importance 190Third Group: Factors Responsible for Longer

Trends 210Next Steps—the Place of Research 219

APPENDIX

Aggregate Fluctuations of Producers' Goods,Residential Housing and Automobiles 227

xv)