42 Generating Economic Cycles 



was found to originate a derived cycle of agricultural 

 prices. American manufactures, according to the cen- 

 sus of 1900, obtained about 80 per cent of their raw 

 materials from the farms, and as the prices of manu- 

 factured comm.odities tend to adjust themselves to the 

 cost of production, it was argued that the eight-year 

 cycles in the prices of farm, products tended to induce 

 derivative cycles in the prices of manufactured com- 

 modities. The major features of economic cycles were 

 regarded as being traceable to three primary laws: 



(1) the law of the generating cycle of raw mate- 

 rials, which is due to a non-economic cause; 



(2) the law of demand for raw materials, in con- 

 sequence of which the generating cycle of 

 products originates a derived cycle of prices 

 for raw materials; and 



(3) the law of competitive price, according to which 

 prices of finished goods in an open market tend 



to correspond with the cost of production. 



The inquiry is now carried a stage further. An 

 analysis is made of the history of prices in Great 

 Britain, for a century, and the results are considered 

 with reference to their dependence upon generating 

 agricultural cycles and with regard to their bearing 

 upon the economic theory of cycles. 



Data and Method 



The data for the first part of the investigation are 

 the Sauerbeck index numbers of general wholesale 

 prices for the interval between the Napoleonic wars and 

 the Great War. This record from 1818 to 1913, which 



