Readings in Money and Banking / Selected and Adapted

by Chester Arthur Phillips

Moore's "Rainfall" Theory

[246]To Professor Moore the fundamental problem of economic dynamics is to formulate the law governing the "ebb and flow of economic life" which is "the most general and characteristic phenomenon of a changing society." The motto of the department of agriculture of the United States—"Agriculture is the foundation of manufacture and commerce"—is significant and that the farmer is at the mercy of the weather is proverbial. There may be such a close connection between the weather, the crops, and crises that we shall be able to find in weather changes the cause of crises.

An examination of all the numerous factors involved in the problem would be a stupendous task and Professor Moore limits himself to a consideration of a selected few. "The variation in the quantity of the rainfall is one of the weather changes known to have a marked effect upon the yield of the crops." Hence the inquiry is directed to an examination of the "appropriate data with reference to three things: (1) the periodicity of rainfall; (2) the effect of rainfall on the crops; (3) the relation of the yield of the crops to economic cycles." The study is a statistical one conducted with the greatest of care to avoid error and the conclusions are deserving of the most careful consideration. All generalizations are made carefully and used cautiously with a full realization that a limited area—the upper Mississippi Valley—has been used and a period of only seventy-two years surveyed. Of the numerous climatic factors only rainfall has been examined.

Remembering that these limitations are fully realized we may state the conclusions in Professor Moore's own words: "The fundamental, persistent cause of the cycles in the yield of the crops is the cyclical movement in the weather conditions represented by the rhythmically changing amount of rainfall; the cyclical movement in the yield of the crops is the fundamental, persistent cause of economic cycles." This should be supplemented with a statement of the law that has been sought and which may be formulated thus:

The weather conditions represented by the rainfall in the central part of the United States, and probably in other continental areas, pass through cycles of approximately thirty-three years and eight years in duration, causing like cycles in the yield per acre of the crops; these cycles of crops constitute the natural, material current which drags upon its surface the lagging, rhythmically changing values and prices with which the economist is more immediately concerned....

In conclusion we may merely observe that many theories are obviously presented to defend some of the other views of their advocates. The connection of the socialist theory with the socialistic idea of value is an obvious one. It may also be true that interest in some particular phase of study may cause the investigator to overlook the importance of other elements in the problem. Thus to Professor Moore climatic conditions seem of great importance, while Professor Mitchell relegates them to a very minor position. As time passes it will doubtless be possible to estimate the significance of each factor with more accuracy. When this is done a more satisfactory theory can be formulated and methods of prevention and alleviation employed to better advantage.

Stringent Money and Financial Panics[247]

Is there any tendency for financial panics to occur more frequently in the seasons of the year when the money market is normally stringent? It has been found that the two periods of the year in which the money market is most likely to be strained are the periods of the spring trade revival (about March and April) and that of the crop-moving demand in the fall; and that the two periods of the easiest money market are the "readjustment period," extending from about the middle of January to about the first of March, and the period of the summer depression, extending through the summer months. Of the eight panics which have occurred since 1873, four occurred in the fall or early winter (i. e., those of 1873, 1890, 1899, and 1907); and one (i. e., that of 1903) extended from March until well along in November. Out of a total of twenty-one minor panics or "panicky periods" occurring between 1876 and 1908, inclusive, nine occurred during the fall and early winter, eight during the spring, one began in May and extended into June, three occurred during the summer months, and one occurred in February. The evidence accordingly points to a tendency for the panics to occur during the seasons normally characterized by a stringent money market.