, 1923-01-21


u general tendency toward equality.
In other words. in the long run, per.
!ods of prosperity tend to be about
equal. They vary greatly IN dura-
ton. and they vary greatly IN inteR.
sity. But the intense periods are
usually short. and the mild periods
are usually long. SO hat the area or
mass is remarkably constant. Tho
the form of the next period of pros.
perlty Is still undetermined, we know
III advance with reasonable assurance
that its area or mass viii be ap-
proximately that of previous periods.
jhortly after 1t has begun to develop,
here may be a clue to Its probable
crm, whether intense and brief, or
moderate and prolonged.
Besides this principle of action
and reaction. there is another feature
Of the business cycle that IAN safely
be applied in practical ways. Every
business and every locality has its
own particular place in the cycle. The
bond market, for example, is usually
Tar in the lead. declining or advanc.
Ing before other factors show a
change of trend. The stock fnrket
also has n pronounced lead. Tho not
so prompt as the security markets.
building Is somewhat in the van as
compared with other lines of bust 4 SIS
activity. Near the other extreme is
retail trade, which is a laEgard both
on the up-Swings and the down.
swings. comparing different sections
Of the country, the manufacturing
centers tend to lead, and the regions
Of production of raw materials tend
to lag. Comparing the physical guam.
tity Of business with its dollar value,
quantity advances or declines before
value. In a store, the number of
sales slips physical quantity tends to
decline before the cash register read.
lngs amount of sales in dollarsl. : In
a construction industry, the number
OF permits tends to decline before
their value in dollars.
But the thing OF real Importance is
not merely to know this sequence
which Is a fairly simple proposition
but ! to know how fast the period
Of depression or over-expansion is be.
ing run off. For example. early in
1920 the stock market turned down,
it ItLtAltI WIN HDllCtu Ills HTt
v6rsal and attempted TO estimate
when the lightning would strike hit
own business would have been at a
loss to set the date. But presently.
when general business sank below
per and began to sweep out an area
OF depression. then the retailer was
able to forecast. Knowing how much
depression was due and how fast II
was being worked off, and knowing
also his relative position in the cycle,
the retailer could estimate very close,
y when his turn was coming.
ITO illustrate the real meaning OF
the business cycle. one OF the best
a~nalogies is to compare It with cleo
tricity. Call prosperity electric power
and suppose that you are entitled 10
$1,000 kilowatt hours. II you run your
outfit at 10 kilowatts you last 1000
hours. II at 1000 ki,owatts. you last
only 10. hours. Or you can compro
mise at 100 kilowatts and sast 100
hours. The word business cycle is
really not the word to use. Cycle
implies time. II is area or mass
which is the important measurement
There is no real need OF either over
expansion or depression. We could
run along at a steady trend indefin,
itely, with cycles practically elimin.
ated. The principle Of action and re.
action is absolutely sound, but the
popular conception of the cycle is
both unsound and dangerous.
ITO be concrete-business Is now
statistical,y at normal. By the so.
called business cycle we are at n
bad center. The B-absonchart shows
this very clearly. But this is no rea.
son why we must stay there or why
the next movement will not be for the
better or for tho worse. It all de,
ponds upon how we nct.-act toward
one another and act toward the res,
of the world. When Greed is en-.
throned we are headed for depres.
Fion-when service is in the saddle
we are headed for prosperity. II
there was less talk about business
cycles and moro about business
ethics' It would be better for all OF
u.s.