extending beyond the limits of any one state." Laborers dissatisfied with what they have been able to secure through wages boards may easily foment a dispute which will bring their case before the Commonwealth Arbitration Court. The popularity with the laboring classes of Mr. Justice Higgins, who for several years has presided over the Commonwealth Arbitration Court, has increased the desire to get cases into court; and the rapid growth within the past two years of the number of cases presented to the Court for hearing has necessitated the appointment of two additional judges; a development which clearly shows that there is a disposition to make full use of the Court.

Nevertheless, it is not probable that the wages boards will soon, if ever, disappear. Their success and popularity in Australia has been too great to warrant such an assumption. The fact that even the arbitration states have adopted or retained the wages boards and incorporated them into their arbitration systems shows that there is a real need for these preliminary conferences between employers and employees to endeavor to reach an agreement in matters in controversy before the dispute goes if it does go-to the arbitration court. The fact that in the great majority of cases an agreement is reached in these conferences augurs well for the continuation of the conciliation plan.

M. B. HAMMOND.

OHIO STATE UNIVERSITY.

REVIEWS

MOORE'S ECONOMIC CYCLES

In this volume1 Professor Moore again makes use of his characteristic method, developed in his earlier volume on Laws of Wages. The method, in brief, is to derive economic laws inductively from statistics by means of the modern refined methods of the calculus of probabilities. The specific problem in the present instance is to derive the law of business cycles of expansion and depression from data as to rainfall, crops, and prices.

First, by an application of Fourier's formula to data as to rainfall in the Ohio valley and in Illinois, he finds that the annual rainfall obeys a compound cyclical law based on cycles of eight and thirty-three years. He then correlates the rainfall at the critical period of growth for each crop with the total yield and with the yield per acre of the principal staple crops. These in turn are correlated with prices of pig iron and with general prices. The laws which he derives from this analysis may be briefly stated as follows. The annual rainfall, as just stated, obeys a law of compound cycles of eight and thirty-three years' duration. The yield of the great staple crops, both the gross yield and the yield per acre, obeys a similar law, presumably in the relation of cause and effect. The upward phase of a period of agricultural productivity brings with it, allowing a lag of a few years, a period of general business expansion, characterized by an increased demand for producers' goods (of which pig iron may be taken

1 Economic Cycles: their Law and Cause. By Henry Ludwell Moore. New York, The Macmillan Company.

The reviewer wishes to acknowledge his indebtedness to Sewall G. Wright for valuable suggestions, and assistance in making the computations involved in preparing this review.

as typical), increased employment of labor, an increased demand for all kinds of goods, and a consequent rise in general prices. This process is arrested when the cycle of agricultural productivity begins its downward phase; and a reverse series of phenomena then appears. In the author's words: “These cycles of crops constitute the natural, material current which drags upon its surface the lagging, rhythmically changing value and prices with which the economist is more immediately concerned."

As a necessary step in the logical course of his argument, Professor Moore also makes some interesting studies in demand curves. From tables of the output and prices of certain staple goods he constructs a percentage demand curve by making the abscissas proportional to the percentage change in output for each year above or below the output for the preceding year (each preceding year being successively used as a base), while the ordinates are made proportional to the corresponding changes in prices, similarly computed. From this exploration he emerges with what he appears to regard as a surprising discovery, namely, the discovery of a new type of demand curve. "Our representative crops and representative producers' good exemplify types of demand curves of contrary character. In one case, as the product increases or decreases the price falls or rises, while, in the other case, the price rises with an increase of the product and falls with its decrease." 11 2 In connection with this discovery he treats somewhat patronizingly the whole ceteris paribus type of reasoning of his predecessors. The universal, negatively inclined demand curve of Professor Marshall is characterized as "an idol of the static state." The fruitfulness of the statistical method is contrasted with the "vast barrenness" of the conventional method.

Take, for example, the question of the effect of the weather upon crops. What a useless bit of speculation it would be to try to solve, in a hypothetical way, the question as to the effect of rainfall upon the crops, other unenumerated elements of the weather remaining constant! The question of the effect of temperature, ceteris paribus! How, finally,

The

would a synthesis be made of the several individual effects? statistical method of multiple correlation formulates no such vain questions. It inquires, directly, what is the relation between crop and rainfall, not ceteris paribus, but other things changing according to their natural order; what is the relation between crop and temperature, other things conforming to the observed changes in temperature; and, finally, what is the relation between crop and rainfall for constant values of temperature? The problem of the effects of the constituent factors is solved only after the more general problem has received its solution. This method offers promise of an answer to the question as to the relation between the effective demand price and the supply of the commodity.

A valuable feature of Professor Moore's work is the insertion of the tables of statistics upon which his argument is based. This enables the reader, if so inclined, to check or supplement the reasoning. Numerous periodograms and examples of demand curves also illustrate the subject matter.

There can be no difference of opinion as to the great value of Professor Moore's method. He is doing pioneer work and is doing it with painstaking detail and thoroness. The more economic theory can be reduced to the status of an exact science, the more serviceable will it become in bringing to finer order and adjustment our intricate and highly organized modern life. It is, therefore, with diffidence that I approach the task of criticizing a book involving at once such keen mathematical insight and such immense industry in laborious detail. Yet, to me, it falls short of conclusiveness. Several links in the logical chain seem to need closer scrutiny.

In the first place, the alleged discovery of an eight-year cycle is suspicious. It certainly does not harmonize with data relating to industrial crises. These are known to follow more nearly a ten-year cycle. Now an eight-year cycle, however adjusted to the dates usually given for crises, would bring some at a period of high prices, some at a period of low prices, and some at intermediate points. It is clear, then, that if Professor Moore's economic cycles are real, they

text.

2

The full multiple correlation here suggested is not, however, carried out in the

* Pp. 67, 68.

represent a phenomenon disconnected with the well known phenomenon of industrial revulsions. This discrepancy led me to undertake an independent study of the data.

It was first observed that the eight and thirty-three year cycles were derived from data as to annual rainfall, while the whole argument rests upon the effective rainfall at the critical periods of growth of the several crops considered. Professor Moore fails to correlate these two. Perhaps he may have regarded it as safe to assume that if the annual rainfall follows an eight-year cycle, the same would be true of effective rainfall. Yet while a study of the data for annual rainfall reveals a fairly well marked cycle of eight years with an amplitude of 4.13 (p. 24), the periodograms for effective rainfall (pp. 46, 47, 48, 54) show only a very minor indication of an eight-year cycle (amplitudes, 0.21, 1.71, 0.21, 0.24). There is more indication of a four-year cycle (amplitudes, 1.22, 1.39, 1.22, 0.40). The periodograms give the same impression to the eye. Now, later in the text, when general prices are correlated with crops, a lag of four years is allowed to give time for the crops to show their effect in prices. If the cycle of rainfall is four years and if rainfall is the efficient cause of fluctuation in crops, clearly a lag of four years is meaningless prices could hardly be one full cycle in advance of their efficient cause.

Still, there might be a mean effective rainfall cycle of longer period than four years, but not necessarily eight, which would account for the high correlation between crops and prices noted later in the text. To investigate for such a cycle the following method was employed. It is confessedly less exhaustive than Professor Moore's method of amplitudes but is believed to be fairly conclusive at least, sufficiently conclusive to form the basis of a working hypothesis. If a series of numbers be given, then by means of the formula,1

[o, standard derivation of the differences.]

This formula is given in "A short method of calculating the coefficient of correlation in the case of integral variates." J. A. Harris. Biometrica, vol. vii, p. 214.