The Method of Investigation

Beveridge ascribes crises to industrial competition, May to the disproportion between 19-20 the increase in wages and in productivity, Hobson to oversaving, Aftalion to the diminishing marginal utility of an increasing supply of commodities. Bouniatian to overcapitalization, Spiethoff to overproduction of industrial equipment and underproduction of complementary goods, Hull to high costs of construction, Lescure to declining prospects of profits, Veblen to a discrepancy between anticipated profits and current capitalization, Sombart to the unlike rhythm of production in the organic and inorganic realms, Carver to the dissimilar price fluctuation of producers' and consumers' goods, Fisher to the slowness with which interest rates are adjusted to changes in the price level.

One seeking to understand the recurrent ebb and flow of economic activity characteristic of the present day finds these numerous explanations both suggestive and perplexing. All are plausible, but which is valid? None necessarily excludes all the others, but which is the most important? Each may account for certain phenomena; does any one account for all the phenomena? Or can these rival explanations be combined in such a fashion as to make a consistent theory which is wholly adequate?

There is slight hope of getting answers to these questions by a logical process of proving and criticizing the theories. For whatever merits of ingenuity and consistency they may possess, these theories have slight value except as they give keener insight into the phenomena of business cycles.