Gerhard Tintner, Price-Quantity Interactions in Business Cycles (1947)

Gerhard Tintner’s book review assesses Frederick C. Mills’s study of cyclical relations among physical output, unit prices, and monetary values in the American economy. Its central judgment distinguishes descriptive achievement from methodological adequacy: Mills produces useful measurements and broadly credible findings, but Tintner doubts that the National Bureau of Economic Research’s methods can adequately explain—or even intelligently describe—the behavior they record. The review moves from the sample and measurement framework through the empirical results to this theoretical and statistical objection.

Mills examines 64 commodity prices over a nominal span of 1858–1938, although Tintner notes that only about half the commodities have observations reaching back to 1914. The extensive agricultural representation includes raw materials, livestock, foods, and processed products. This coverage matters because the study’s conclusions depend on comparisons among commodity groups and stages of production. Its organizing method is the reference-cycle approach described by Arthur F. Burns and Wesley C. Mitchell in Measuring Business Cycles: commodity behavior is examined against a common business-cycle framework.

Tintner gives particular attention to Mills’s descriptive measures. Average amplitude combines average expansion and contraction; joint cyclical variability sums squared price and quantity amplitudes across nine stages of the cycle. Tintner notes a resemblance between the latter measure and Gini’s mean difference, then explains its division into price and quantity components. The more consequential conceptual move is Mills’s use of elasticity and flexibility:

Cycle elasticity is the average response of quantity to price and other economic forces in the cycle. Flexibility is the average response of price to quantity and other economic forces in the cycle. The concepts are here used in a sense quite different from the usual one in economic theory.

These definitions describe responses across the cycle while including other economic forces. Tintner’s warning about their departure from ordinary theoretical usage prevents the reader from treating them as straightforward measures of familiar price–quantity relationships. Their descriptive usefulness does not by itself establish an adequate theoretical interpretation.

The findings reveal substantial differences among commodities. Prices generally exhibit a stronger and more consistent cyclical pattern than quantities, while average elasticity and flexibility are approximately one. Durable goods, capital equipment, and non-farm products show high joint cyclical variability; consumer goods, foods, farm products, and non-durables show low variability. Relative price variability is especially high near extraction and final consumption. Foods display particularly high flexibility, and farm products and consumption goods generally combine flexible prices with inelastic quantities.

The results are on the whole not surprising but confirm the expectations of most business cycle theorists about the cyclical behavior of prices and quantities.

Confirmation is thus the study’s principal empirical contribution as Tintner presents it. The measurements differentiate commodity behavior and corroborate existing expectations, rather than overturning business-cycle theory. His final assessment nevertheless separates agreement with the results from acceptance of the method:

In terms of the methods used and developed in the National Bureau this is a good study which is suggestive even to economists and statisticians who do not entirely agree with them. But the reviewer believes that these methods themselves are not adequate for an analysis or even an intelligent description of price and quantity behavior in the business cycle.

Tintner calls for a more thorough theoretical basis than that tacitly implied by commodity classifications, together with more refined statistical techniques. He does not specify an alternative model or procedure. The review’s relevance lies in this sharply drawn methodological distinction: systematic measurement and plausible findings remain valuable, but neither substitutes for an explicit account of the economic relationships being measured.