Knowledge that Transforms

T HIS article presents a revision of our weekly and monthly series for bank debits outside New York City, I9g9 to date. The revised series have been adjusted for seasonal influences, but the problem of the determination and elimination of secular trend has been reserved for consideration in a later article.' The monthly series corrected for seasonal variation, I9I9-3 i,is given in Table i and Chart i; the corresponding weekly series, in Chart 2.

I. Price stabilization broke down and prices of copper broke wide open, falling to 912 cents a pound, the lowest figure reached since I894. 2. The impact of a severe business depression combined with other factors brought about an apparent decline in world consumption of virgin copper of 425,000 tons, a volume only one-eighth less than the average yearly copper output during I9T9-28 of the whole world outside of the United States. 3. Stocks of refined copper in the hands of Western Hemisphere refiners as a result increased by I96,000 tons, almost to a high record level, in spite of curtailment in world copper output of some 334,000 tons. 4. Most of this curtailment occurred within the United States, and the five largest producing organizations of the United States together reduced output by an amount greater than the total world curtailment. 5. The United States imported copper on balance it is said, for the first time in fifty years.

W E are reproducing the chart of bond yields NV 7 and money rates, monthly, beginning with the decade of the nineties, last published in this REVIEW for July 1923, pp. 2I4, 2I5. The curve for money rates shows commercial paper, seasonally adjusted for the years i890-94; without seasonal adjustment for the years I9I5-22; and adjusted tentatively, on the basis of one-half the pre-war seasonal movements, for the years I923 to date. The bond-yield index is based on ten railroad bonds. For the years I890-I9I0, the index computed by Wesley C. Mitchell is presented; for the years I9Ii-i8, that index adjusted to conform to the level of our ten railroad bond index during the period I9I9-22; and, for the years I919 to date, our own index. For both commercial-paper rates and bond yields, the changes in the series are indicated by the use of slightly different legends on the chart. It will be noted that, at the end of I930, the adjusted monthly figure for commercial-paper rates was lower than at any time since the decade of the nineties; a rate appreciably lower is shown only once on the chart, namely, in the second half of i894.1 Another striking fact evident from the chart is that the peak reached in I929 is substantially below that of I920. The differing commercial credit situations of the two years are reflected in this contrast, since the stringency of the earlier period arose from business inflation to a greater degree than that of a later period. Federal reserve operations also tended to moderate the stringency in commercial rates. Despite the large cydical swings evident, moreover, a downward trend is discernible in this class of rates, especially since the establishment of the federal reserve system in I9I4. It may be mentioned in passing that time rates on collateral loans, as quoted on the New York Stock Exchange, have not shown such a trend, though present quotations are very low. Unlike commercial-paper rates, bond yields have not reached conspicuously low levels. They are still above 4 per cent, whereas they were below this figure during much of the first decade of the century. The sharp fluctuations in the bond market since last September are clearly shown by the movements of the yield index. The rise in yields toward the close of last year now appears merely as an interruption of the decline beginning late in I929, but it has not yet brought bond yields below the post-war low of this index, reached at the end of I927. The maximum divergence between the level of bond yields and ' The rise in January I93I was due entirely to the seasonal correction (shortly to be revised) which allows for a decline in this month greater than is justified by post-war experience.

I N a previous article the derivation of monthly indexes of wholesale import and export prices for the United Kingdom, I880-I9I3, was described.' The present article deals with the results obtained in the statistical analysis of (i) import prices, export prices, and the ratio of import to export prices; (2) gold exports, imports, and excess of imports over exports; and (3) the value of United Kingdom produce exported. A necessarily brief discussion of possible inferences, explanations, and conclusions relating to the interpretation of the results obtained, with some supplementary data required for proper articulation, is presented.2 The two price indexes and their relative movements receive most attention. The export value series is selected for present purposes as picturing cyclical variations in British industry and foreign trade. The gold series are not only important in themselves as central data in international trade discussions, but also illustrate technical difficulties.A The fragmentary presentation of a few statistical series cannot reflect broad theoretical interests, nor the complexity of the interrelations involved in international trade phenomena and problems. A brief statement of the writer's general theoretical position may, therefore, be in order. Adoption of the dynamic, as opposed to the static, approach to economic problems is the unifying element in this position. The difference between these two is considered that between generalization through greater abstraction or simplification, and generalization which ties in particular cases by properly allowing for what occurs or may occur in time. The explanation must keep pace with the changing alternatives in a non-homogeneous economic complex of events; a generalized theory must be broad enough to allow for shifts in time (and the economic events ordered in it) and in points of vantage (assumptions), while at the same time building into its conceptional structure derivations of particular cases. Economic movements are held to be the resultants of a complex of interrelated factors, proceeding at variable rates. Not only are innumerable combinations possible, but the system is not even closed. Consequently, owing to the complexities it attempts to comprehend, the dynamic method must often be purely empirical. In inductive investigations of the theory of international prices and trade little consideration has been given to the question of the time within which verification may be expected. The result has often been a too tenuous connection between the statistical materials examined and the deductive theory. The pure theory is concerned with a logical sequence in which the period of time is that required for the full working out of the forces assumed to be in Qperation. The qualification at any given time or factors remaining equal performs the logical function of eliminating disturbances. This logic involves considerable abstraction from economic events and is perhaps I This REVIEW, Vol. XII, pp. I39-48. 2 The writer's chief interest in the study of British international trade, i88-i9I3, is in the restatement, as the first step towards their solution, of important problems in the theory of international trade and prices; and in contributing towards the development of a suitable technique statistical technique is only part of this for the solution of these and similar problems. International trade is viewed as only an aspect of trade in general, but, because of the separation of statistical materials, offering remarkable opportunities for analysis of economic realities. For example, the mechanism or perhaps thermodynamics whereby international shifts in purchasing power resulting from changes in relative demands or costs (supplies), or from credit creations considered in their proper economic context and not in vacuo, are related to changes in relative prices and price levels, appears to have some bearing on the problems connected with the dynamic phenomena (cyclical and secular) of domestic trade, and the way in which credit expansion starting with New York banks finds national expression. And the problems of mechanism and economic effects connected with rates of new capital issues, investment, savings and production, are in essence the same as those involved in capital exports. The relative timing of new bond issues and the utilization of their proceeds is not different from the process of foreign investment in relation to the creation of an export surplus. The late Professor Allyn A. Young has called attention to the domestic gold flows, cyclical in character, between the interior and New York which are essentially like international gold flows. 3 Sources of data. Import and export price indexes and related series: calculated by writer (see this REVIEW, Vol. XII, pp. I39-48). Value of exports of United Kingdom produce, data on gold movements, and value of iron and steel products exported; Trade and Navigation Reports for the United Kingdom. Sources of other data are indicated in text.