country accompanied the establishment of Labour Exchanges, the Committee are rather notably hesitant, though the investigation of the National Bureau includes a full and well-informed and, on the whole, favourable chapter by Mr. Leo Wolman, on the working of insurance in Britain and elsewhere.

For several of the other chapters in this part of the book Professor Wesley Mitchell is in whole or in part responsible, and all that he says demands attention. Particularly interesting, if somewhat speculative, is the endeavour to estimate the economic losses, in production and in income, caused by business cycles. "The broad result is that the worst years run something like 15 to 20 per cent. behind the best, and something like 8 to 12 per cent. behind the moderately good years. The summary description of business cycles (based, of course, mainly on Professor Mitchell's earlier book) leaves rather glaring the gap in his argument as to why prices rise from a depression. Increasing cost of production, through the "cumulative expansion in the physical volume of trade," is surely no explanation at all. When, late in the revival, factories are passing from being fully occupied to actual expansion of staff or machinery, they naturally may have greater expenses and may raise prices. But, at the beginning of the revival, when factories are passing from doing only a fraction of their normal output up to full output, the cost of each unit of production must be falling, not rising.

The substance of Mr. Berridge's book named above appears also in this investigation as a contribution on "Statistics of Employment." Those who, every time that unemployment is more severe than usual, cry over-population or the end of the world, should consider his statement that "in actual diminution of employment, the depression of 1921 was almost twice as acute as 1908." From 1921 America has recovered; 1908 is generally reckoned one of her worst years.

Other chapters deal with the methods of stabilising production in particular industries, such as textiles, engineering or building, the long range planning of public works and the problem of "cancellation" of orders in times of depression. Financial devices for controlling or mitigating the severity of business cycles (this, of course, is the heart of the subject) are treated shortly, but with excellent judgment by Mr. T. S. Adams. He discards any single remedy. "The clearest duty of business man and banker is to assist in the development of more accurate cyclical statistics. Plot the phases of the cycle, and a combination of self-interest and vitalised public opinion will force the

application of the many remedies-not one remedy-which common sense will show to be appropriate. To anticipate the cycle is to neutralise it."

W. H. BEVERIDGE

Costs and Profits: their Relation to Business Cycles.

By

H. B. Hastings. (Cambridge, Mass.: Houghton Mifflin Co. Pp. xi +168.)

THIS book is the third of the series being produced by the Pollok Foundation, the first being Irving Fisher's Making of IndexNumbers. The author undertakes the difficult task of trying to throw further light on the causes of fluctuations in business activity. He sets out to investigate, by analytical reasoning, why it should be that a period of business activity cannot continue without rise of prices or accumulation of growing stocks of goods. The rôle of the speculative dealer is recognised, but the principal contention is that the accumulation of unsold goods during the upward swing of business is due to the failure of the flow of purchasing power into the hands of ultimate buyers to keep pace with the flow of finished goods into the market. The principal reason for the insufficiency of purchasing power the author finds in the fact that business concerns do not promptly disburse all realised profits. If they disbursed an amount equal to their full cost of production, purchasing power would increase pari passu with goods for sale, and most of the book is taken up with an analysis of the various ways in which this full disbursement fails to be made.

There is much that is interesting and useful, and the book repays study. The critic may suggest, however, that insufficient attention is given to the question whether saving of income, whether by individuals on their own behalf, or by business concerns, is any larger than normal in the circumstances in question. Wealth is presumably growing, and the saving of a certain proportion of realised income is a normal circumstance. If it be the case, as no doubt it is, that in times of prosperity business firms, instead of disbursing the total profits which they might disburse, by various devices, tuck away some of the profits, it might be the case that if they did not do so, the individual shareholders would save more. The state of business activity which is in contemplation implies, for the time being, an acceleration of the normal rate of growth; and is not a corresponding acceleration of saving necessary if equilibrium of prices is to be maintained? How can the accelerated output of houses, machinery, railways,

etc., be marketed if there be not the normal proportion of income devoted to their purchase? So far as machinery and other intermediate goods are concerned, it is to a large extent savings effected by business, rather than by the individual shareholders which furnish the market for purchasing it. It may be that more than the average proportion of profits is devoted to, in effect, increasing the capital of the business in prosperous times, but that does not seem to be the author's point. He wants businesses to disburse the maximum profits, and appears to assume that the shareholders are going to spend it all—at all events nothing is said about the possibility of their not doing so.

One feels some doubt whether the arithmetical calculations in Chapters II relating to a community of a few people, useful so far as they go, have not given a bias in favour of regarding industry as the production of goods which are bought outright and consumed quickly. When one thinks of the businesses of building houses and railways, opening up new mines, etc., and pictures them in a state of accelerated activity, the problem seems to be not why the product gets on the market before the wages and profits have got there, but the reverse. This aspect of the situation is one which requires more attention than is given to it.

One may venture to suggest that what is first required is an analysis of what happens in the case of a smoothly growing community-one which maintains a certain rate of growth for a substantial time. Even there purely arithmetical methods will be found to be full of difficulty, and the disturbing effect of an acceleration or retardation of the rate of growth introduces still more complexity.

The book is to be commended as stimulating and thoughtprovoking, even if one feels that there is still a great deal more to be said.

C. F. BICKERDIKE

British Prices and Business Cycles, 1779-1850 (The Review of Economic Statistics, Prel. Vol. V., Supplement). By N. J. SILBERLING. (Harvard Economic Service: Cambridge, Mass., U.S.A. October, 1923.)

HERE, in forty double-column pages, is the most important contribution to the statistical history of the transition from the eighteenth to the nineteenth centuries which has been made for a very long time. Professor Silberling has got at new sources of information for commodity prices: the Governor of the Bank of England has helped him to a new series of figures for the Bank's

holdings of Exchequer and trade bills; and he has made much fuller use than any previous writer of these statistics of countrybank-notes, which were issued as Parliamentary Papers at irregular intervals, after the notes became liable to stamping for excise duty, in 1804-5.

The new series of commodity prices come from two old Price Current volumes in the Library of the Board of Trade, two in the British Museum, and one in the Guildhall Library. Prices (as in Tooke) were often quoted in bond, and, where they were not, steps have been taken to eliminate the duty element in the price. A hundred and fifteen price series were copied and charted; but eighty were rejected, either because of defects in the series; because the commodity was liable to some abnormal cause or causes of fluctuation; because its quality was inconstant; or because its price movements were adequately represented by an allied article for which a better series of figures was at hand (e. g. pot ashes and pearl ashes). There remained thirty-five thoroughly representative commodities of " independent types" with excellent continuous quotations, or quotations so nearly continuous as to allow of easy interpolation. From these a quarterly, not an annual, index-number has been calculated, on the basis of the geometric mean and without weighting. A second, weighted, "cost of living" number has also been taken out "for one group of articles which represent in a fair degree the expenditures of British working-class families." Great care has been taken, and, as will appear, with interesting results, to make the main index-number represent more or less equally the important geographic divisions outside Great Britain," in order to exclude undue influence from one area perhaps affected by war or special economic conditions. Two sub-groups have also been made from the thirtyfive commodities: one containing British goods and goods in whose price freight was a small element; the other, goods bearing "relatively heavy freight charges." A comparison of these sub-groups suggests to Professor Silberling-and to his reviewer"that increased costs of transportation were by no means so important a factor in creating the high war-time price level as Thomas Tooke seems to have believed."

66

The main curve naturally comes into comparison with that of Jevons, the structure of which Professor Silberling criticises rather severely-mainly because of bad grouping and “haphazard weighting." The criticisms are for statisticians, not for the present reviewer, to discuss. But as Jevons, for the early period, took his prices "mostly from Tooke's tables" (InvestigaNo. 133.-VOL. XXXIV.

H

tions, p. 142), and as Professor Silberling has a wider and more carefully selected basis, a comparison is interesting. There is, however, only one heavily marked divergence. Jevons made the peak-years 1809-10; Professor Silberling makes them 1813-14 and explains the reason. Baltic markets were specially disturbed in 1809-10, and Tooke's figures assign undue importance to Baltic produce; for Tooke-as Professor Silberling might have noted but does not-was in the Baltic trade.

Professor Silberling's cost of living index-numbers, based on a weighting which assigns 42 to food, 8 to clothing materials and 6 to fuel and light, yields a most challenging result when set side by side with Professor Bowley's 1899 calculation of annual agricultural earnings-which Professor Silberling, following, as one supposes, American usage, calls "wages." Between the most certain early dates of the earnings calculation, 1780-90 and 1823-33, the curves show a movement definitely favourable to the of course "imaginary "-average agricultural earner of England and Wales; "no little improvement in the material condition of a considerable social group," as Professor Silberling puts it. This is not the conventional account of what was happening between these dates (see, for example, Mr. and Mrs. Hammond's Village Labourer), although vital statistics and some other classes of evidence, which there is not room to discuss here, do, in fact, give some support to it. Perhaps Professor Bowley will have something to say to it from the statistical side.

In a second section the commodity index-number is correlated, first with bankruptcy statistics; next with Bank of England notes outstanding and with Bank of England total advances; then with Bank of England discounts of commercial paper, 1794-1830, and with country-bank-notes stamped 1806-25, the one period for which these last most important figures are available. From this study of the business cycle perhaps the most important results are, first, "that the major variations in prices precede those of Bank advances almost without exception " (which fits in with modern experience, exonerates the Bank from liability for credit inflation to some extent, and justifies its contemporary claim that it stepped in to give help when markets were failing); second, that the peaks of country-bank-note issue, in these critical nineteen years, were simultaneous with or preceded" price peaks, as one would have guessed. Some important studies of bills discounted and discount rates from 1830 to 1850 conclude the work.

It has seemed best to make the review simply a summary of