14G Economic Cycles: Their Law and Cause 



and commerce are largely dependent upon the volume 

 of the crops, it seems likely that the demand for general 

 commodities would decrease with a deficiency in the 

 harvests, and, according to the dogma of the uniformity 

 of the demand function, the prices of general commodi- 

 ties should rise. The ultimate result of bad harvests, 

 therefore, would be a rise in general prices. The facts, 

 however, bear out the contrary view. General prices 

 fall with a decrease in the yield per acre of the crops. 

 A consideration of this difficulty led to the discovery 

 that there is a positive type of demand curve as well as a 

 negative type. For a representative producer's good, 

 for example pig-iron, the law of demand is such that as 

 the amount of commodity increases the price of the 

 commodity rises, and as the amount of the commodity 

 decreases the price of the commodity falls. The exist- 

 ence of both positive and negative types of demand in a 

 highly dynamic society suggested a working theory 

 which seemed to account for the interrelation of all 

 the known relevant facts, and which may be stated in 

 compact form. The rhythmically varying yield per 

 acre of the crops is the cause of Economic Cycles: 

 When the yield increases, the volume of trade, the 

 activity of industry and the amount of employment 

 increase ; the demand for producers' goods increases and 

 the prices of producers' goods rise; the demand curves 

 for agricultural commodities rise; with the ultimate 

 result of a rise of general prices. The contrary changes 

 would follow upon a fall in the yield per acre of the 

 crops. 



