Around in Cycles

Back in 1934 two budding economists wondered, as others had before them, if sunspots affected agricultural production and thus food prices. When they studied sunspots they found that their wax & wane apparently bore no relation to the rise or fall of agricultural production. But they were amazed to find that sunspot activity coincided with the rise & fall of industrial production and of stockmarket prices.

Such startling coincidences--or, as some firmly believe, "causes"--have given rise to a new quasi-economic science which smacks of witchcraft, astrology and old-fashioned predestination. Biologists, astronomers, chemists, et al. had already found that much of the growth and movement in their fields seemed to be governed by natural cycles controlled by mysterious agencies. Could the same be true of business and industry? Did economic man have no more control over his fate than the lemmings?

The answer is a qualified yes, as given in Cycles, the Science of Prediction (Holt; $3), the latest and most understandable book on the cycle theory. Its authors are balding, professorial Edward R. Dewey, 51, executive director of the Foundation for the Study of Cycles* and economic consultant to such companies as Air Reduction Co., Inc.--who supplied the data; and Edwin F. Dakin, biographer (Mrs. Eddy) and public-relations man for planemakers, steelmakers and shipbuilders--who put it into readable, layman language.

In doing so, Dakin so simplified the complex theory of cycles that some hard-headed businessmen and conservative economists may dismiss the whole thing as moonshine. Nevertheless, Dewey, who insists that the theory is based on objective facts, was an accurate enough prophet to predict, in 1943, what many experts are now saying, that the boom would reach its peak in 1947. And Shelf Union Oil Corp., welcoming even a beam of moonshine in the murky field of economics, has recommended the book for its executives.

The Rhythm's the Thing. In the cycle theory, the basic elements are trends and cycles. Trends are the long-term rates of growth, while cycles are the shorter up-&-down deviations which take place during the growth. Dewey & Dakin hold, along with Alvin H. Hansen and other "mature school" economists, that the end of the U.S. economy is leveling off, that it has matured. Consequently, the downswings of the cycles may become deeper because there is less & less new growth to counteract them.

Out of the scores of cycles in the economy (each industry has its own), Dewey & Dakin have decided that four cycles, or rhythms, are basic. The four are: the 54-year, the 18 1/3-year, the 9-year and the 41-month rhythm.

The important fact about cycles, say Dewey & Dakin, is that world wars, depressions and other economic cataclysms do not seem to change the rhythms. They may distort them, i.e., a cycle may go higher or lower, but its basic length is not changed.

For example, Dewey & Dakin contend that the building cycle reached its peak in late 1942. Because the cycle is now on the downgrade, the expected boom will probably not develop. In the last month, builders have jittered over the same thing. But they blame it on high prices. Dewey & Dakin say it was in the cards all along.

Economicasting. Until the study of cycles becomes as exact as astronomy, their true cause can hardly be guessed at. Dewey & Dakin hold that trying to control the rhythms on the facts we now have would be as childish as trying to control the ebb & flow of tides. "Like the weatherman," say Dewey & Dakin, "we are concerned initially not with altering the weather, but with the problem of predicting it with fair accuracy, so that those due to be out in it can be properly prepared."

As a sample of economic weathercasting, Dewey & Dakin offer a chiller: the U.S. economy will gradually run down until 1952. Around then (they warn against fixing dates too exactly) all of the four basic cycles are scheduled to hit bottom (see chart). How deep that depression might be they do not say. They think it cannot be averted by political tinkering, public works, etc. But they are not confirmed pessimists. Eventually, they feel, the depression will pass--simply because all the cycles will start up again.

* Some notable members: Great Britain's Hon. Patrick Ashley Cooper, governor of Hudson's Bay Co., and Biologist Julian Sorell Huxley, Canada's Frank Cyril James, principal & vice chancellor of McGill University; Economist Wesley Clair Mitchell; Astronomer Harlow Shapley.

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