Wesley Clair Mitchell

English

Research Papers in Economics

This PDF is a selection from an out-of-print volume from the National
Bureau of Economic Research
Volume Title: What Happens During Business Cycles: A Progress Report
Volume Author/Editor: Wesley Clair Mitchell
Volume Publisher: UMI
Volume ISBN: 0-870-14088-4
Volume URL: http://www.nber.org/books/mitc51-1
Publication Date: 1951
Chapter Title: Our Basic Concept
Chapter Author: Wesley Clair Mitchell
Chapter URL: http://www.nber.org/chapters/c3165
Chapter pages in book: (p. 6 - 7)CHAPTER 2
Our Basic Concept
Many writers on business cycles have dispensed with a formal
definition. Assuming that they and their readers understood
the term, they have plunged promptly into the subject matter.
We cannot imitate this pleasant directness. For those who set
out to observe certain phenomena must have at least a pre-
liminary notion of what to look for. As they find and examine
specimens, they may revise their first concept, but without
some guiding idea they can hardly begin to observe.
The first step in our program, accordingly, was to develop
a working definition of business cycles. To that end we studied
theoretical writings to see what their authors believed to be
the salient phenomena. Then we examined the descriptions of
cyclical fluctuations in historical sources, the efforts of statis-
ticians to isolate the cyclical component in time series, and
'indexes of business activity'. Our findings were published in
1927 under the title Business Cycles: The Problem and Its
Setting. The book culminated in a definition of the kind we
needed. Experience in using it as a guide to observation led to
several emendations. In its present—still tentative—form, our
working concept is as follows:
Business cycles are a type of fluctuation found in the aggregate eco-
nomic activity of nations that organize their work mainly in business
enterprises: a cycle consists of expansions occurring at about the same
time in many economic activities, followed by similarly general reces-
sions, contractions, and revivals which merge into the expansion phase
of the next cycle; this sequence of changes is recurrent but not
periodic; in duration business cycles vary from more than one year
to ten or twelve years; they are not divisible into shorter cycles of
similar character with amplitudes approximating their own.'
lA. F. Burns andW.C. Mitchell, Measuring Business Cycles (National
Bureau, 1946),p.3.
6BASIC CONCEPT 7
This definition stated our preliminary notion about the cul-
tures in which business cycles appear, and described what we
thought to be the common features by which they can be
recognized and distinguished from movements of other types.
Whether the definition would serve its purpose could be
determined only by using it as a guide to observation. Do
cyclical fluctuations of the alleged duration occur in most eco-
nomic activities? If so, is there substantial agreement in their
timing? What leads and lags appear? If a dominant pattern
emerges, what activities share in it and what follow different
courses? Do cyclical expansions and contractions run a con-
tinuous round, or is one cycle sometimes separated from its
successor by an interval during which the tide neither ebbs
nor flows? Do business cycles occur in all nations where pri-
vate enterprise prevails, and only there? How far back can they
be traced in history? 'vVhat relations subsist among the cycles
in different nations?
To answer all these questions with assurance would require
wider ranging studies than we have been able to make. Our
detailed observations have been confined to four nations—the
United States, Great Britain, France, and pre-Nazi Germany.
Relatively few of the time series we have found run back of
1900; many begin at the close of World War I, and some
exceedingly valuable records are still shorter. Concerning the
economic fluctuations of precapitalistic times in our four na-
tions, in other nations practicing private enterprise, and in
nations where private enterprise has been superseded by other
forms of economic organization, our evidence is vague. Even
within our four-nation, recent-time limits we have used only
parts of the available data; but we have gone far enough to
test the definition as a tool of research.
Since time series constitute the most definite records of eco-
nomic we began collecting them while we were
experimenting with our analytic technique. That the collec-
tion should and could cover a wide variety of activities had
been shown by the work of our predecessors. Whenever pos-
sible we gathered monthly data, supposing from the first, and

What Happens During Business Cycles: A Progress Report

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