R. A. GORDON, University of California, Berkeley
This is a second progress report on a long range study of business cycles in the interwar period.1 For the purposes of this paper, I have chosen to center attention on the investment boom of the '20's. It is on this portion of the broader study that most progress has been made. As a matter of fact, the longer range study has as its starting point the twofold assumption that the causes and nature of this prolonged boom are not fully understood and that a detailed historical study of the investment stimuli operating on the economy in these years may throw some needed new light on the cause of both the severity of the collapse after 1929 and the slowness of the recovery after 1932.
The main part of this paper is devoted to a fairly detailed study of the factors influencing the behavior of the main components of total investment during the '20's. To provide essential background for this analysis, I shall first deal briefly with two related topics: the significance of the distinction between major and minor cycles in interpreting the cyclical experience of the interwar period, and, secondly, the bearing of events during the short cycle of 1919-21 on the development of the major expansion after 1921. The latter discussion will, I hope, add to our understanding of the forces responsible for the turning point following the sharp deflation of 1920-21.
Table 1 lists the National Bureau reference dates for the business cycles during the interwar period. Let us begin with the initial assumption that, to understand the cyclical forces operating upon the American economy in these years, we must group the five cycles listed in Table 1 on the basis of the frequently cited distinction between major and minor cycles. Thus____________________