BUSINESS cycles result from the fact that all industrial nations produce their durable goods in waves or surges of output instead of manufacturing them in steady flows varying little in volume from month to month and year to year. By contrast they manufacture their nondurable goods, such as textiles, and foods, and gasoline, paper and printing, soap and tobacco, tires and shoes, in comparatively steady volumes of production. These nondurable goods have to be produced in fairly regular amounts, for we are constantly using them up, or wearing them out, and replacing them. Most of them are necessities of life and so we consume almost as much of them in hard times as we do in prosperity.
Durable goods include all the machinery of production, everything that goes into construction, all plants and power lines of our public utilities, all appliances of business offices, as well as some things used by families, such as automobiles, house furniture and furnishings, refrigerators and radios. These are long-lasting goods, and the ones we have can almost always be made to do service for additional years if that seems desirable. In fact we do postpone replacing them in all the depression periods, and we busily renew and increase them in times of prosperity. We have been alternately speeding up and slowing down our production of durable goods for a great many years, and so have all the other industrial nations, and it is that uneven production that causes the expansions and contractions of business activity which we know as business cycles.
This book is the account of a study undertaken in the attempt to find out why the expanding production of durable goods turns downward at the top of prosperity and begins to contract, and why it stops shrinking at the bottom of depression and turns upward and begins to expand once more. Clearly these turning points result