116 Economic Cycles: Their Law and Cause 



the crops falls during a period of falling general prices, 

 and rises during a period of rising general prices. With 

 these facts in mind it is not difficult to conceive how 

 general prices may fall during a period of diminishing 

 yield per acre of the crops and rise during the period 

 that the yield is increasing. The falling yield in the 

 crops would lead to a diminution of the volume of trade, 

 a decline in the demand for producers' goods, a fall in 

 the prices of producers' goods, a decrease in employ- 

 ment, a fall of the demand curves for crops, with the 

 final result of a fall in general prices. Similarly, a 

 rising yield in the crops would lead to an increase in 

 the volume of trade, an increase in the demand for 

 producers' goods, an increase of employment, a rise 

 in the demand curves for crops, with the final result of 

 a rise in general prices. Provided the interrelation of 

 the economic factors are in accordance with this de- 

 scription, then it would follow that the cyclical move- 

 ments in the yield of the crops should be reproduced 

 in cyclical movements of general prices. If the actual 

 facts bear out this deduction, there can be no doubt 

 that the cause and law of economic cycles have been 

 discovered. 



The Fundamental, Persistent Cause of Economic Cycles 



To put the theory to the test of facts we require an 

 index number of general prices throughout the period 

 covered by most of the investigation in this Essay — - 

 the period from 1870 to 1911. There is no one index 

 number covering this period for the United States, but 



