82 Economic Cycles: Their Law and Cause 



of this chapter, how imaginary, theoretical difficulties 

 are dispelled by solving real problems. 



Of course it is theoretically possible when there is a 

 deficiency in the production of corn, that oats, hay, and 

 potatoes may be substituted in part for corn, but in- 

 stead of conjuring up these and other possibilities that 

 are never tested, would it not be wise to ascertain first 

 just how closely is the variation in the price of corn 

 related to the variation in its own supply? When the 

 statistical investigation is made and it is found that 

 the correlation coefficient is r = — .789, and that when 

 a skew relation is assumed instead of the usual linear 

 relation, the connection between the variables is still 

 closer, one sees very clearly, if our illustration is a 

 typical case, that for most of the problems of actual 

 life, it is unnecessary to face the complex possible in- 

 terrelation of phenomena contemplated in the theoret- 

 ical treatment. For the sake of economy of time and 

 of talent, theoretical and statistical work should go 

 hand in hand. Even the complex theoretical problem 

 that has just been sketched may be tested as to its 

 hypotheses and conclusion by the statistical method 

 of multiple correlation. 



Elasticity of Demand 



The coefficient of the elasticity of demand for a 

 commodity has been described as the ratio of the rela- 

 tive change in the quantity of the commodity demanded 

 to the relative change in the price, when the relative 

 changes are infinitesimal. Starting with this descrip- 



