Friedrich August von Hayek [attributed; published anonymously] · 1927
Published anonymously and attributed to Friedrich August von Hayek, this methodological article explains business-cycle research and its application to Austria. It proceeds from cyclical dynamics through statistical measurement and forecasting to an Austrian adaptation of Harvard’s economic barometer, accompanied by methodological literature and a numerical appendix. Its governing distinction is between identifying the economy’s position within a cycle and predicting its future with certainty.
Die einzige Regel des Wirtschaftsablaufes scheint der ständige Wandel in seinen Teilen zu sein und die Unregelmäßigkeit, mit der diese Veränderungen erfolgen, jeder Vorhersage des Kommenden zu spotten.
English translation: The only rule of the economic process seems to be the constant change in its parts, and the irregularity with which these changes take place seems to mock every prediction of what is to come.
This apparent disorder motivates the distinction between daily fluctuations, seasonal variations, long-term development, and cyclical waves. Their different timescales have different consequences for business decisions. Entrepreneurs may perceive immediate market changes more readily than the broader movements determining the success of long-term commitments.
Für alle auf längere Frist geplante Unternehmen sind so gerade Bewegungstendenzen ausschlaggebend, die dem im geschäftlichen Leben Stehenden am wenigsten zum Bewußtsein kommen.
English translation: Thus for all enterprises planned over a longer term it is precisely those tendencies of movement that are decisive which come least of all to the consciousness of the man engaged in business life.
The article presents a stylized sequence of depression, recovery, expansion, financial strain, and industrial crisis without developing a complete causal theory. Money, credit, and differences among industries organize the account. Low interest rates encourage securities-market activity and investment before general business recovers; capital-goods industries lead expansion, while wages and other costs initially lag.
Hier ist es erst das langsame Weitergreifen der unmittelbar durch die günstige Lage des Geldmarktes angespornten Industrien, das endlich den Impuls zu neuem Aufschwung gibt.
English translation: Here it is only the slow spreading of the industries directly spurred on by the favorable position of the money market that finally gives the impulse to a new upswing.
Recovery spreads unevenly rather than lifting all activities simultaneously. Later, rising financing costs weaken investment and profitability. Industries supplying further expansion become vulnerable when its pace slows, while credit tightening makes inventories harder to finance. Liquidation can transmit contraction throughout the economy. This ordering supplies the basis for statistical diagnosis: relationships between turning points matter alongside changes in individual indicators.
The methodological sections explain the construction of comparable cyclical indicators. Logarithmic charts represent proportional changes, and standardization relates deviations to each series’ characteristic variability. Persons’s seasonal-index procedure removes recurrent annual influences, while least-squares trends separate longer-term development from cyclical departures. Correlation and time shifts help establish recurring sequences. These techniques require interpretation: detrending may suppress economically significant divergences, and irregular movements cannot simply be eliminated by calculation. Structural changes, especially adjustments following the World War, are difficult to distinguish from cyclical fluctuations through statistics alone.
Harvard’s barometer converts observed sequences into a practical framework. Its A-curve represents securities-market activity, B general business and commodity prices, and C money-market conditions. Successive turning points indicate a likely phase and direction without determining exact timing. Comparisons with Britain and Germany reveal recurring relationships alongside exceptions. The barometer registers conditions from which developments may be inferred; it does not mechanically disclose the future.
The Austrian experiment examines 1896–June 1914. Limited monthly evidence requires substitutions: securities-clearing payments replace an unavailable share-price index, a newly calculated index combines twelve responsive wholesale prices, and private discount rates represent money-market conditions. Steel output and the central bank’s discounted-bill portfolio provide supplementary checks. The numerical appendix documents the series and transformations.
The results remain qualified. Austria resembles Germany, including a departure from Harvard’s expected sequence around 1899–1900; the next cycle conforms more closely, while the Balkan War disturbs the final prewar cycle. Steel production sometimes moves contrary to expectations, potentially reflecting cartelization. Such discrepancies establish the barometer’s investigative value without making its patterns universal laws.
The concluding institutional agenda follows from these limits. Disrupted postwar continuity prevents immediate construction of a fully comparable Austrian barometer. Domestic indicators require supplementation through neighboring economies and comparisons between capital- and consumer-goods production. The article thus joins systematic measurement to historical and theoretical judgment: statistical regularities inform forecasts but cannot guarantee them.
This work was divided into 6 sections when it entered the library's research corpus—an apparatus for search and citation, not necessarily the author's own table of contents. Each title opens its summary.
Put a question to this work; the Librarian answers from its 6 sections and cites the passage.
Ask the Librarian