(with F. Snapper)
In this paper we endeavour to make use of the statistics of commodity stocks in order to throw some light upon the trade cycle and the issues arising from it.
Our main problem is: Do commodity stocks move in positive or inverse correlation with the cycle? Important issues as to the momentum of the 'cumulative process' hinge upon the answer to this question. For, in the case of positive correlation, investment in commodity stocks would be an important accelerating force in the mechanism of booms and depressions, tending to make any increase in investment activity somewhere in the economic system the impelling force of a cumulative process. By analogy, in the case of inverse correlation changes in the size of stocks would be a retarding force.
It would, of course, be most desirable to be able to make use of statistics of the stocks of finished as well as of unfinished goods. For then it might be possible to say something about the relative size of stocks at different stages of production in different phases of the cycle, a very important problem to all those who, unyielding to the attractions of 'macrodynamics', refuse to see in crises simply fluctuations in total investment. Unfortunately, we have at our disposal statistics of unfinished commodities only. 1 There is, however, reason to believe that the stocks of finished products move in positive correlation with the cycle, because they are kept by producers and merchants as a constant percentage of turnover.
We thus shall have to confine ourselves to the study of raw material stocks and try to find out what light they throw upon the trade cycle. So far, Mr Keynes has been the only one to