Hans Mayer: On the Present State and Future of Business-Cycle Research (1933)

Hans Mayer’s contribution to Der Stand und die nächste Zukunft der Konjunkturforschung is a methodological essay on what would constitute an adequate explanation of business cycles. It moves from a classification of contemporary research to the narrower problem of crises, then examines the limits of deriving recurrent crises from the general conditions of an exchange economy. Its central distinction is between accumulating knowledge of observable movements and explaining the dynamic process that produces them. Mayer values statistical investigation, but insists that neither correlations nor descriptions of successive changes establish why equilibrium repeatedly gives way to expansion and contraction.

The opening diagnosis identifies the displacement of deductive theory by descriptive phenomenology and morphology. Time series, correlations, trends, indices, and lags have organized an immense body of experience and disclosed previously neglected connections. Their achievement nevertheless remains preparatory:

Alles, was die rein statistische Konjunkturforschung geboten hat, bleibt eben doch nur, vom Erkenntnisziele aus gesehen, Material, liefert Bausteine für die Erklärung, ohne sie selbst zu geben.

English translation: Everything that purely statistical business-cycle research has provided nevertheless remains, viewed from the standpoint of the objective of understanding, merely material: it supplies building blocks for the explanation without itself providing that explanation.

This is a division of explanatory labor, not a rejection of quantitative research. Mayer assigns statistics considerable heuristic value and an important role in verifying theory. Its further usefulness, however, depends on advances in qualitative analysis, which he regards as still rudimentary in economic dynamics. His striking analogy is to economic disproportionality itself: statistical research produces more intellectual means of production than theory can presently turn into finished explanations. The deficiency lies in the conceptual framework needed to use the evidence.

A second class of research attempts to mediate between abstract deduction and description. Such theories begin with general premises about exchange economies but introduce institutional facts wherever the deduction encounters difficulties. Alternatively, they treat intermediate links as given even though those links require explanation. Mayer includes monetary cycle theories here because they start from institutionally conditioned credit expansion. His objection concerns the scope of their conclusions: valuable partial explanations cannot become universally valid merely by inserting contingent conditions into an ostensibly general deduction.

The third and most demanding project is a strictly connected, general explanation. Mayer approaches it through crisis as the limiting case of the cycle, both because its problem can be defined more sharply and because explaining it would contribute substantially to understanding cyclical movement as a whole. The wider cycle remains difficult even to delimit in its qualitative and quantitative characteristics.

Der Kern der Krisenerscheinung ist die Tatsache der allgemeinen Absatzstockung („Überproduktion“), die Unmöglichkeit des Absatzes zu einem Preis, welcher die Kosten noch deckt.

English translation: The core of the crisis phenomenon is the fact of a general blockage of sales (“overproduction”), the impossibility of selling at a price that still covers costs.

This definition makes crisis a problem of selling at cost-covering prices, rather than simply an excess of physical output. Because the process unfolds through time in a definite direction, Mayer demands causal explanation. The mutual functional dependencies used in static equilibrium theory cannot by themselves explain that directed development.

He then distinguishes two questions frequently grouped together as crisis theory. Explaining a particular historical crisis requires identifying the circumstances that disrupt equilibrium and those that prevent immediate adjustment. The rigidity of large production installations is one example of the latter. Such explanations employ numerous causal chains that terminate relatively quickly in historical facts accepted as data. They can produce secure knowledge, but their applicability narrows as the number of independently assumed conditions increases. Mayer thus recognizes their legitimacy while locating them close to historical reconstruction.

The more ambitious question is whether cycles, especially recurrent crises, follow necessarily from the most general conditions of an exchange economy. Answering it would require a general theory of economic dynamics. Yet Mayer’s final movement exposes a difficulty within the premises of that project:

Zu den allgemeinsten Daten jeder verkehrswirtschaftlichen Theorie gehört „rationelles Verhalten“ aller Handelnden, also auch der Unternehmer. Aber diese Formel ist ohne bestimmten Inhalt (ihr auf Seite der Konsumentennachfrage einen Inhalt gegeben zu haben, ist ja gerade die Leistung der modernen Werttheorie).

English translation: Among the most general givens of every theory of an exchange economy is “rational conduct” on the part of all actors, hence also entrepreneurs. But this formula has no determinate content (to have given it content on the side of consumer demand is precisely the achievement of modern value theory).

Profit-seeking intentions do not determine successful conduct. Outcomes depend on entrepreneurs’ foresight, inventiveness, understanding of demand and competitors, and recognition of remote consequences. Accordingly, neither technical progress nor cheap credit explains crisis simply by offering an opportunity for expansion. What matters is whether, and how extensively, entrepreneurs exploit those opportunities while anticipating their eventual repercussions.

Mayer ends with a qualified turn toward empirically identifiable entrepreneurial types, as attempted by some psychological crisis theories. Since entrepreneurial decisions channel income flows and carry economic development, their variability cannot be bypassed by assuming rationality. The essay’s significance lies in this tension: it demands rigorous general explanation while showing why an abstract behavioral premise cannot supply the determinate causal laws that such an explanation requires.