Prosperity and Depression.pdf

Clap. 8 ReGent DisfllJsions on the Trade Cycle 2.49must be subdivided, the method must be made more miscroscopic.But so long as aggregates, even restricted in scope, are used, thereis always the danger that the intemal structure of these aggregates(in other words, the relationships between their subdivisions) mayprove to be significant; this would force the economist to split upthe aggregates so far undivided and to try to construct his systemin terms of subdivisions of these aggregates. Thus the businesscycletheorist is always tom between the temptation, on the onehand, to go into minute details and·to workout an endless numberof individual cases where the course of events is decisivelyinfluenced by small details, and the passion, on the other hand, forconstructing sweeping theories with a few bold strokes ofthe pen.The stony path of the economist working in this field leads constantlybetween the Scylla of a maze of individual cases of anunmanageable casuistry and the Charybdis of ingenious andclean-cut but lofty and half-true theories.Mr. KEYNES' theory has still another character­Stati~ versus istic which distinguishes it from all business-cycledynamic theories : it is essentially static. By· a static theory,theories. we mean a theory where all the variables (magnitudesto be explained) relating to a certain point or periodof time are explained by data relating to the same point or periodoftime. 1 Such a theory can never explain a movement in time.It can only answer the question : Given certain data at.a certainmoment, what will be the result at that moment? True, if thedata change in time, then the results will also change. But achange in data cannot be explained. (If it could, then the datawould cease to be. data and· become variables.) They must begiven (or assumed) anew for each successive point in time. Thismethod of dealing with economic change is frequently· calledcc comparative statics "':.1 C/., for example, Frisch, loc. cit., and J. Tinbergen, " Suggestions ­on Quantitative Business-cycle Theory ", Econometf'ica, Vol. 3, 1935,page 241.• Usually, the, assumption is made that, after a change in the data hasoccurred, a certain period of time must elapse before a new equilibriumemerges. Comparative statics in the strict sensecon:fines itself to describingthe two equilibria, the starting-point and the destination of theeconomic system. Any attempt, on the other hand, at analysing in