LIMITATIONS OF THE MATHEMATICAL 

 METHOD 



SUCH a mathematical formula as : Hog prices equal .56 bank 

 clearings .56 hog receipts must always be applied with 

 common sense. In November of 1914, for instance, hog receipts 

 at Chicago were abnormally small on account of foot-and-mouth 

 disease, and in December of the same year they were abnormally 

 large for the same reason. Judging from receipts, we might have 

 expected heavy hogs to sell for $8.83 in November and $6.44 in 

 December. As a matter of fact, the actual price was $7.50 in 

 November and $7.10 in December. It was commonly recognized 

 by the trade that hog receipts at Chicago in November and Decem- 

 ber of 1914 were abnormal, and not representative of the poten- 

 tial supply in the country at large. 



Occasionally, as in November of 1907, falling prices act to 

 curtail receipts. The small receipts in November, 1907, would 

 have indicated a price of $6.75, whereas the actual price was $4.90. 

 As a matter of fact, there was a large number of hogs that year, 

 and the actual price reflected the potential supply rather than the 

 temporary supply. 



It is possible to refine the method considerably. For instance, 

 it may be worth while to proceed on the assumption that the rela- 

 tion between hog prices and hog receipts is best expressed by an 

 equation representative of a hyperbola or skew curve instead of a 

 straight line. The straight line equation, based on the years 1903 

 to 1915, inclusive, is: 



Hog prices equal .8 .56 hog receipts. 

 The hyperbola equation for these years is : 



Hog prices equal 1.24 .55 hog receipts 



+.0046 hog receipts squared. 



The skew or cubic curve equation is : 



Hog prices equal 1.18 .24 hog receipts 



+ .0027 hog receipts squared 

 .00079 hog receipts cubed. 



Using these more complex mathematical methods, it is often 

 possible to express the relationships more exactly. But no method, 

 however far refined, will take the place of common sense market 

 judgment. Nevertheless, it may be decidedly helpful to a better 



