Oskar Morgenstern: Review of Hardy and Cox’s Forecasting Business Conditions (1927)

Oskar Morgenstern’s review evaluates an American handbook of business forecasting by separating its documentary usefulness from its scientific and practical claims. His qualified approval frames the discussion: Hardy and Cox provide a valuable guide to forecasting services and economic statistics, but their ambition to equip individual businessmen to make independent forecasts exceeds the theoretical foundations available.

Morgenstern first surveys the book’s organization. Four introductory chapters establish its general approach, followed by accounts of Babson, Brookmire, Harvard, Moody’s, and Standard Trade and Securities services. These accounts explain the organizations’ charts, methods, and indices, yet their largely uncritical presentation leaves readers without adequate grounds for judgment. Morgenstern particularly objects to the treatment of Babson’s theory of action and reaction and Moody’s views. Among these organizations, he regards the Harvard Service, closely associated with Warren M. Persons, as the significant contributor to the scientific development of forecasting.

Chapters 12–22 assemble statistics covering production, construction, freight, stock-market activity, trade, and prices. Morgenstern praises the reliable descriptions, source references, and supplementary tables. Their comprehensiveness makes the book useful to researchers, while potentially overwhelming the businessman, who receives no principle for selecting among competing indices. This distinction between access to information and the capacity to use it leads into the review’s central methodological objection.

Es ist selbstverständlich unmöglich, an eine solche Arbeit, wie es die vorliegende ist, heranzugehen, ohne bestimmte theoretische und methodische Ansichten zu haben.

English translation: It is of course impossible to approach a work such as the present one without having definite theoretical and methodological views.

A handbook cannot escape theoretical commitments simply by presenting itself as practical. Hardy and Cox seek not merely to help businessmen understand professional forecasts but to make them independent of forecasting services. Morgenstern questions both the efficiency and the scientific legitimacy of this project. Central organizations possess a broader field of observation than most individuals; even their forecasting attempts, however, rest on unresolved problems. His conditional preference for organized forecasting is therefore no endorsement of its established reliability.

Die »Ungeduld der Geschäftswelt mit dem akademischen Theoretisieren« (S. 3) ist gänzlich gleichgültig und darf den Theoretiker nicht zu einem Nachgeben verleiten, das er später vielleicht bitter bereuen müßte.

English translation: The "impatience of the business world with academic theorizing" (p. 3) is wholly a matter of indifference and must not tempt the theorist into a concession which he might later have bitterly to regret.

Commercial demand cannot determine scientific validity. For Morgenstern, prematurely translating uncertain knowledge into a usable technique risks supplying businessmen with a pseudoscientific instrument. The objection concerns the relation between theory and application: practical urgency cannot substitute for an explanation of the processes being forecast.

The review then examines the book’s dependence on theories of business cycles. Morgenstern locates a prospective science of prediction within, and after, a developed explanatory framework:

Sie ist ein spätes Kapitel einer abgeschlossenen Konjunkturtheorie.

English translation: It is a late chapter of a completed theory of business cycles.

Hardy and Cox’s chapter on the causes of cycles consequently matters even though they do not intend to write a theoretical work. Morgenstern finds their compressed assessments unsatisfactory, especially their favorable judgment of Spiethoff based only on Mitchell’s 1913 résumé, without consideration of Spiethoff’s later writings. This becomes a criticism of linguistic barriers within economic scholarship:

Diese Trennung der Wissenschaften nach Sprachgebieten ist ein bedauerliches, gefährliches und ganz unnötiges Phänomen.

English translation: This separation of the sciences according to linguistic areas is a regrettable, dangerous, and quite unnecessary phenomenon.

The failure to consult relevant research undermines the handbook’s theoretical authority. Yet Morgenstern explicitly declines to suggest that another contemporary cycle theory would necessarily furnish better forecasts. His criticism thus preserves the distinction between exposing inadequate foundations and claiming to possess adequate ones.

The closing judgment returns to the book’s genuine strength as an introductory guide to American statistical materials and forecasting publications. The review’s broader significance lies in this disciplined separation of documentary value, explanatory theory, and predictive competence: an abundance of indices may make a useful reference work without establishing a dependable technology of economic prediction.