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D.H. Robertson's study of industrial fluctuation: a centenary evaluation.

Abstract: 1915 is the centenary year of D.H. Robertson's A Study of Industrial Fluctuation. This paper provides a centenary evaluation of this book, dealing respectively with biographical background especially related to economic studies in section 2; a summary of the book's argument in section 3; and consideration of its major sources and its reception by way of book reviews in section 4. The book is one of the early modem British studies of economic fluctuations, which largely avoids monetary explanations of the subject.

1 Introduction

In very late 1915 (the author's preface is dated November 1915), P.S. King, the London publisher, put into circulation Robertson's first book, A Study of Industrial Fluctuation: an Enquiry into the Character and Causes of the So-called Cyclical Movements of Trade. The author was a Fellow of Trinity College, Cambridge and the book was in fact the fellowship dissertation Robertson had successfully submitted to his College on the second time in 1914. An earlier version of the work had been awarded the Cobden Club Prize at Cambridge in 1913, an indication that the book was largely written before the onset of the First World War. Robertson also indicated that various sections of the work had been published earlier in the Journal of the Royal Statistical Society (March 1914). In 1948, a new edition appeared as No. 8 of the London School of Economics Third Series of Reprints of Scarce Works on Political Economy, with a new preface by the author and an appendix reprinting M. Labordiere's 1907 study of the United States' crisis of that year.

This paper evaluates the contents of Robertson's contribution in his first economics book on the occasion of its centenary of publication. It does so in the following manner. After a section (section 2) devoted to Robertson's personal background with special reference to his early studies in economics, the next section (section 3) outlines and critically comments on the contents of the book. The major sources used by Robertson are mentioned in section 4, before by way of conclusion the book's reception and its success as a study of the business cycle are discussed.

2 Biographical Background

Dennis Holme Robertson was born on 23 May 1890, almost, but not quite, coincident with the publication of the first edition of Alfred Marshall's Principles of Economics some two months later in the second half of July 1890. He was born at Lowestoft, Suffolk, the youngest son in a family of six children of Dr James Robertson (schoolmaster, clergyman and a Fellow of Jesus College, Cambridge), and his wife, Constance Elizabeth Wilson. The Robertsons were originally of Scottish stock but by the time of Dennis's birth had been living in England for many generations. The youngest member of a large, shabby, but genteel clergyman's family, Robertson's childhood circumstances were initially rather straitened. As Skidelsky (1992: 272) pointed out (citing Hicks's obituary of Robertson), Robertson's father had just resigned his headmastership at Haylesbury 'under somewhat of a cloud'. Young Dennis grew up at the Whittlesforth Parsonage in Cambridgeshire. His father taught him classics sufficiently well for Robertson to win a scholarship at Eton at the age of twelve. There he flourished. He won many prizes including the Newcastle Prize for Classics; he wrote verse; he edited the Eton College Chronicle; and in his final year became Captain of the school. Memorably, he played the part of the White Queen in an Eton production of Lewis Carroll's 'Alice and the Looking Glass'. He thereby inaugurated a distinctive feature of his published works by their specific association with the Alice books, visible first in his second book, Money, and subsequently in all of his later books, with 'apt' quotes from the Alice books at the start of each of their chapters (for example, Robertson 1922: 1). In 1908, Dennis Robertson won a scholarship in Classics at Trinity College, Cambridge, a starting point for his subsequent highly successful academic career, spent virtually exclusively at Cambridge.

Robertson's career as an undergraduate at Cambridge was very distinguished. He won both the Porson and Craven scholarships, and in 1911 the Chancellor's Prize for English verse. He was first in the honours list for Classics in 1910, and followed this up in 1912 with a first in Part II of the Economics and Politics Tripos. By that year, Marshall had already been retired as Professor of Economics for four years, and Robertson's economics teachers were Arthur Pigou and John Maynard Keynes. Economic studies were chosen by Robertson for the very good Marshallian reason that they would assist a career devoted to the alleviation of poverty. Skidelsky (1992: 273) also points out that Robertson befriended fellow 'old Etonian' Maynard Keynes from 1910, succeeding him as President of the Liberal Club and of the Union. Given his 'dramatic' interests, he also became President of the Amateur Dramatic Club. In the First World War Robertson saw action as Transport Officer in the 11th Battalion, and in the London Regiment, largely in the Middle East. This was despite his earlier devotion to pacifism, a devotion he had initially shared with his Cambridge Professor, Pigou. His war service in 1917 gained him the Military Cross, by virtue of his substantial contribution to the maintenance of supplies during the first battle of Gaza. He became a Fellow of Trinity College in 1914, by the start of the war, his eventually successful fellowship dissertation being his 'study of industrial fluctuation', the work the centenary of which is commemorated in this paper.

Demobilisation in 1919 allowed Robertson to return to Cambridge to take up his Fellowship at Trinity College. Subsequently, he also held various university teaching posts: University Lecturer from 1924, Girdlers Lecturer in Economics from 1928, Reader from 1930 and Professor as successor of Pigou from 1944. He retired from Cambridge University in 1957. For five years, 1939-1944, he was away from Cambridge, serving for one year as Professor at London University and subsequently on war work in the Treasury. His London period was partly a voluntary absence from Cambridge, to escape the active selling of the General Theory by most members of its Faculty. However, at Cambridge in the 1920s and part of the 1930s, his greatest friend and mentor was Maynard Keynes. (For a detailed discussion of their relationship, see Skidelsky 1992: 272-80.) He also then befriended a series of young men in the mid-1920s, among whom was Dadie Rylands. He continued his taste for dramatic activity by participating in the Marlowe Society, Greek plays, as well as in the Shakespeare Society.

Although Robertson's classes and syllabus for Part II of the Economics Tripos, as presented by Pigou and Keynes, would have given him the essentials of economic principles, they would also have given him special fields of interest in the subject of money, the theory of business fluctuations, as well as in the theory of value broadly conceived. At this stage, Keynes was already seriously researching money and it problems, and was working on his first book, Indian Currency and Finance published in 1913. Pigou's Wealth and Welfare published in 1912 concentrated in its pages on the relationship between welfare and national income (its distribution, its growth and its instability, requiring considerable treatment of the business cycle). As discussed in section 4, Pigou was therefore frequently cited in Robertson's first book. His first economics text also 'owed a great deal to Keynes' as he explicitly and strongly acknowledged in the preface to the 1915 book (Robertson 1915: ix-x). It can also be noted in this context that Robertson's Cambridge Economic Handbook, Money (Robertson 1922), had been invited by Keynes (the editor of the series) and was greatly assisted by him when Robertson started work on this book during 1920.

The further unfolding of Robertson's work as an economist need not be detailed here. Publications of books and journal articles rapidly followed over the decades of Robertson's life as an academic. The one other book by Robertson we need to mention in this section is his 1926 publication, Banking Policy and Price Level. In 1949, when it was reprinted, Robertson indicated this to be a way of preserving and re-presenting some parts of the analytical framework of his Study of Industrial Fluctuation (1915), which by then had been long out of print. Ironically, it had been reprinted the previous year (1948) by the London School of Economics, as was mentioned earlier. The 1926 publication was a technical exercise on aspects of the trade cycle, on which Keynes had assisted him, even if Keynes disagreed with the final product. The link with the 1915 Study indicates that in some ways Robertson regarded the first book as a foundation for much of his later work. As the London School of Economics indicated when it reprinted Robertson's book as a classic in economics, the Study of Industrial Fluctuation was a most important first work by the distinguished Cambridge academic in economics.

3 Argument of the Work

Robertson's Study of Industrial Fluctuation is divided into two parts, respectively dealing with fluctuations of individual trades and fluctuations of trade in general. Three of the chapters of Part I are devoted to analysing phenomena of supply, three to phenomena of demand. Part II on fluctuations of general trade covers 'revival', 'crisis and depression', 'the wages and money systems', and a conclusion. This recounts the 'basic argument' of the study, especially with respect to 'remedies for boom and depression'. A preliminary chapter provides an introduction and the study's raison d'etre, definitions of concepts to which it draws attention, and a justification for the work and its method. This analytical skeleton of the work can now be discussed further, commencing with its stated preliminaries.

Robertson's brief introductory section of the preliminary chapter points to both the vast, and rapidly growing, international literature on the manifold causes of business fluctuations published in many languages over the last hundred years, and that, in spite of this, his book can still be seen as an original study with new things to say on the subject. The brief introduction is followed by section 2 on definitions. These, not surprisingly, commence with that of 'industrial fluctuation' by which Robertson understands the 'alternate occurrence of periods of industrial expansion and of industrial contraction' (Robertson 1915: 2). He then looks at the more difficult question of 'what a depression may be said to consist'. Robertson answers this first for a specific (single) trade, before treating a general industrial depression which involves many, if not every trade. Depressed trades are associated with declines in output, with falling margins and profits, with falling prices for the commodities traded and a decline in the firms' net receipts. Declines in the ratio of profits to invested capital are a further important indicator of depression but Robertson selects as his preferred indicators declines in net receipts, in aggregate net profits, and the net rate of profits (Robertson 1915: 3).

Definitions are also required for associated concepts such as 'national dividend', its consumption in terms of both finished and intermediate goods, that is, consumption and investment, and the interrelationship of the two since increases in consumption induce increases in investment. There are also ambiguous products (Robertson's example is coal) which can act as both consumption and investment goods. The final paragraph of the definitional section looks at anticipated forms of these concepts (income, consumption, investment, profit) which may be realised or which may not eventuate, the latter situation frequently a manifestation of depression: for example, 'general depression' can be defined as 'a condition of general disillusionment on the part of investors' (Robertson 1915: 6). A third section justifies and further explains the nature and method of the analysis. Here Robertson mentions that expansion carries the seeds for depression within it, and that its inverse (depression carries the seeds for renewed expansion) is equally true. Finally, his method for studying the phenomenon of business fluctuation is both empirical and theoretical, and, as already indicated, commences with selected industries, followed by industry in general.

The three chapters of Part I, section 1, of Robertson's book deal with the phenomenon of supply. By this, the contents of these chapters indicate that Robertson refers to the process of investment which he described as a fruitful source for general fluctuations in output. One aspect of this is a tendency to over-invest inherent in modem production, and explained in part by the lengthy gestation period in terms of a lag between the completion of an investment and the generation of output which it assists in producing. Secondly, Robertson discusses the aggravations of depression associated with the imperfect divisibility of instruments of production, an argument that leads him to a statement of the accelerator principle (Robertson 1915: 37, 46) in linking investment and output, as another aspect of the supply side. Thirdly, there are fluctuations in costs associated with the investment process, and the possibility of these being affected by either raw material prices (especially coal, but also cotton, wool, linen, and so on) or, more positively, by inventions, which lower costs (Robertson 1915: 66-8).

Four chapters follow, dealing with the phenomenon of demand. Chapter IV examines miscellaneous changes in demand, arising from fashions, from wars and from tariffs. Changing fashions clearly produce fluctuations in demand, as is the case, for example, in the demonstrable impact on the Nottingham lace trade of 'the hobble skirt', or the effect of the growing popularity of bicycle riding among ladies on the demand for fewer and shorter dresses, depressing the Huddersfield clothing market during the general prosperity of 1898 (Robertson 1915: 71). Fluctuations in commodity demand from the vagaries of war and peace, and from the imposition of tariffs, are treated by Robertson (1915: 72-4) as more important causes of demand changes in this context, responsible in recent times for creating considerable excitement in investment demand to ensure that such demand increases can be met. Chapter V investigates demand aspects of crop values, transport and construction. For example, increased crop volumes from good harvests entail increased demand for transport services. If excess crop volumes are exported, demand for sea transport and eventually for new ships will be generated, providing important investment stimulus. There may also be 'psychological' influences of crop volumes: large crop volumes stimulating optimism and an impulse to higher employment of resources (Robertson 1915: 85). These effects are illustrated by Robertson from Argentinian and Canadian export experience (Robertson 1915: 86-8). Chapter VI analyses the effects of large crop values on construction, that is, bringing price effects into the picture. Agricultural prosperity in the United States, for example, had made farmers a creditor rather than a debtor class. As in the case of crop volumes, crop values had also a psychological influence on rural investment, but not necessarily with a positive impact on the demand for constructional goods. This is particularly the case when high crop prices are the result of small crop volumes, as a consequence of pronounced harvest failure.

Chapter VII links crop values to consumption via the incomes derived from such crop values. This is shown by the link between cereal prosperity in the United States, and the demand from that country for imported food stuffs (Robertson 1915: 104). Similar links are visible from United States prosperity in cereal production and construction and the economic situation within the English (Yorkshire) woollen industry. Robertson warns that consumers (such as those in India or in the British domestic market) have a more direct impact on the prosperity of British cloth manufacturing than that which comes from the demand of producers in other countries in the manner illustrated in the opening sentences of this paragraph. The remainder of chapter VII provides further illustrations of the linkages between foreign production and consumption and the demand for imports from other countries, in order to complete the examination of the demand side of the problem for individual industries. This completes Part I of the book, devoted to the analysis of fluctuations in output and employment of particular trades.

Part II provides three chapters and a conclusion on fluctuations of trade in general, dealing respectively with the revival phase of the cycle (Chapter I of Part II), the crisis and the depression phase of the cycle (Chapter II of Part II), and the wage and monetary system which are part of the transmission mechanism of a general cycle (Part II, chapter III). The chapters of Part II including its conclusion may be described as the core of the book, presenting as they do Robertson's general theory of the cycle underlying his views on business fluctuations. The contents of these important chapters can be examined in turn, together with the conclusions to which they lead.

At the start of Part II, chapter I, Robertson (1915: 121-2) explains that the sequence of topics in the chapters of Part II is quite deliberate. The first chapter deals with the recovery phase (upswing) of the cycle; and with crisis and depression (downswing) of the cycle in the second chapter. The analysis in these chapters abstracted from the monetary and wage systems; the consequences of removal of this abstraction are discussed in the third chapter, before final conclusions are presented in the fourth (and final) chapter.

Robertson (1915: 125-9) then discusses the impact of increased domestic consumption on the upswing, directly by its effect on demand, indirectly by the large proportionate change in the demand for investment goods which it generates. A rise in the exchange value of its production can likewise generate new demand for an emerging upswing, as revealed in the analysis of the results of a good harvest on domestic demand. The possible variations in such results (negative, neutral and positive) are analysed by Robertson in detail, suggesting the conclusion that they are generally positive, given realistic values for the elasticity of demand of rural products (com). This discussion was directed in part at the analysis of business fluctuations presented by W.S. and H.S. Jevons (see Robertson 1915: 129-30, 1445, but cf. 151-3) which made the argument of harvest cycles too general in this respect. A substantial part of Part II, chapter I, is devoted to this topic.

Section 5 of the chapter links the harvest analysis to the increased attractiveness of investment, as part of the upswing. Such attractiveness is enhanced when inventions are exploited during the upswing. The use of new raw materials and energy sources such as oil and electricity plays a similar role to that of inventions. Oil had become increasingly important because it made possible the growing use of motor vehicles, while it also improved many types of shipping; growth in electricity supply assisted other forms of transport, such as passenger railways and trams (Robertson 1915: 159-60). The final pages of the chapter warn that upswings may be generated by all of these various causes, though increased consumption is not an essential feature in generating an upswing. Investment, including that arising from the adoption of inventions from new methods of production, are portrayed by Robertson (1915: 162-4) as more important features of recent international experience in the upswing from actual business cycles.

Part II, chapter II, section 1, explains the causes of a crisis which leads the business cycle into prolonged depression (the downswing). Rising costs and particularly those from agricultural shortage are part of the background for a sudden crisis in business activity to eventuate. Robertson (1915: 167-70) emphasises that imbalance between the output of agricultural production and production in general cannot be the sole cause of a crisis in economic activity. This leads Robertson (Part II, chapter II, section 2) to seek the causes of a crisis in stock depletion and general capital shortage, as well as in foreign trade problems visible in fluctuations in the balance of trade. Sudden price changes are also considered by him as important in this context, as are variations in the consumption levels of selected sections of the consumption goods industry. Finally, monetary factors can be introduced in this matter. Monetary scarcity, and high interest rates, may play significant roles as causes of a crisis, and cannot therefore be completely ignored in the discussion (Robertson 1915: 177-80).

Part II, chapter II, section 3, examines the essential causes of 'constructional relapse'. These are confined to the 'actual depletion' of stocks of consumable goods. Illustrations come from English experience in cotton goods production; Argentinian trade with England; and the substantial role of innovation in Germany (particularly electric power and its application to manufactures). To explain the crisis, two arguments have to be kept in mind: 'first, the relapse of constructional industry is seen to be due to the existence or imminence of an over-production of instrumental as compared with consumable goods.... Secondly, so far as our argument yet goes, there is no reason for the consumptive trades as a whole to be adversely affected by the constructional collapse' (Robertson 1915: 187). Robertson illustrates this at length from the experience in various countries (German coal trade, English woollen industry) and concludes (in section 5) with a critical discussion of 'the law of markets' in the context of explaining a general depression (Robertson 1915: 198-200). This relies on industries (construction and transport) with high capital investment which need to produce output on an extensive scale, despite the fact that the demand for their products is highly inelastic. For them, over-production is a distinct possibility given their substantial investment requirements.

Chapter III of Part II reviews the role of the wage and money system in this presentation of business fluctuation theory. Its five sub-sections in turn deal with 'the wage system and the volume of production'; 'money in the boom'; 'money in crisis and depression'; the role of gold; and finally a section on 'under-consumption', largely a criticism of J.A. Hobson's views thereon as set out in his Industrial System (Hobson 1910). This chapter was designed to supplement the four earlier chapters by emphasising that business fluctuations are associated with both a wage system and a monetary system even if they cannot be treated as purely a monetary phenomenon in the manner of Ralph Hawtrey's (1913) Good and Bad Trade. It may be noted here that Robertson himself extended his monetary analysis of the trade cycle in his Cambridge Handbook, Money (Robertson 1922, especially chapter VIII) and more completely in his Banking Policy and the Price Level (Robertson 1949 [1926]: vii-viii), where its direct links with his 1915 Study of Industrial Fluctuations are briefly explained. In fact, it can be said that Robertson's later work on monetary theory was invariably designed to illustrate aspects of his first book on business fluctuations.

This leaves the concluding chapter. First of all, this concisely presents the characteristics of the phases of the cycle starting with the upswing as affected by improved means of production, relative cheapening of agricultural output, expanded production in manufacturing, discovery of new markets, and favourable monetary conditions from increased gold stocks and relatively easy bank finance available to business. These characteristics of expansion gradually lose their strength as output expands, eventually inducing a crisis followed by a period of depression. The last in turn slowly generates an upswing and expansion so that the cycle can repeat itself.

A discussion of remedies to either prevent or reduce the impact of industrial fluctuations follows. Robertson (1915: 242) suggests that increased remuneration of agricultural activity, reducing the necessity for discontinuity in the investment process without sacrificing efficiency, reducing the tendency to miscalculation either during the boom or the depression and, fourthly, by anything mitigating incidental effects of over-investment which prevents it from being followed by a very large volume of consumption during the depression. He then rather negatively evaluates the impact of inflationary policy on curing depression of economic activity (Robertson 1915: 244), before suggesting practical remedies in the form of improved information, better banking and monetary policy and, in the interest of securing stable prices, reduced real wage rates (Robertson 1915: 248-9). Remedial measures during a depression are discussed in section 3. These include discriminatory pricing, philanthropy or benevolence to restore consumption power to sections of the community, and enhanced government consumption to assist the 'artificial elevation of demand'. Improved income distribution, if that is possible to achieve, is a further potential remedy (Robertson 1915: 251-4).

The empirical nature of Robertson's (1915) analysis is strikingly visible in the eleven statistical tables and thirteen charts designed to illustrate many of the statistical arguments presented in the book. The book ends with a good classified index subdivided into trades, authors, countries and general concepts and institutions. This assists in identifying the sources used by Robertson in his analysis of trade fluctuations, a matter to be briefly pursued in section 4 of this paper.

4 Sources and Reception

Of the seventy-one authors listed in the index (Robertson 1915: 284), by far the largest number are British economists: forty-four. Germany follows with ten authors, closely followed by the United States (nine) and France (seven). The list also includes many of the leading business cycle theorists of the late-nineteenth, early-twentieth century, namely Albert Aftalion, M.I. Tugan-Baranowski, Irving Fisher, R.G. Hawtrey, J.A. Hobson, H. Hyndman, H.S. and W.S. Jevons, Karl Marx, W.C. Mitchell and Arthur Spiethoff. As Presley (1981: 179) points out, Schumpeter's important work on business cycles was not known to Robertson at this time. Robertson did not become aware of it until the end of the 1920s. Robertson (1963: 392) mentioned it approvingly, however, in his Lectures on Economic Principles in the context of the stagnation thesis.

Cambridge economists are a sizeable proportion of the British authors quoted. In alphabetical order, they include Arthur Bowley, Sidney Chapman, William Cunningham, Ralph Hawtrey, Maynard Keynes, H.D. Macgregor, Alfred Marshall and Arthur Pigou. It may be noted that Marshall and Pigou receive the largest number of entries in the author index.

Pigou was almost certainly the major influence on Robertson when writing his first book. Pigou, after all, had himself contributed to business fluctuation literature, both in his Wealth and Welfare (1912) and in his Unemployment (1913). Moreover, there is 1913 correspondence extant from Pigou to Robertson in which Pigou encouraged Robertson 'to dig down behind monetary appearances to real facts'; advice which Robertson had clearly taken when constructing his book (cited in Presley 1981: 177). Pigou, together with Maynard Keynes, had also been Robertson's major teachers when he was studying for Part II of the Economics Tripos.

On the other hand, although Marshall was undoubtedly the major economics idol for Robertson for most of his life, the citations from Marshall in Robertson's first book are sometimes critical of Marshall's views, even if, as Robertson (1915: 11) indicated in the opening chapter, his work would make considerable use 'of the processes and terminology ... associated in this country chiefly with the name of Dr. Marshall'. Robertson (1915: 188, n. 1), however, argued that Marshall 'throws little light upon the difficulty' of explaining why distress 'is either general or permanent'. A 'famous generalisation of Marshall' on the impact of an increase in the stock of bullion on the financial system is described by Robertson (1915: 228) 'to be only a partial presentation of the truth'. A few pages later, Robertson (1915: 234) repeats the need 'to adopt a skeptical attitude towards Dr. Marshall's generalisation', mentioned in the previous sentence (from Robertson 1915: 228). In his first book on economics, Robertson was therefore not frightened of criticising the work of Alfred Marshall, even if he was 'the master'.

There were rather few reviews of Roberson's book in the academic journals. They were not always laudatory. Edwin Cannan (1916: 228-9) reviewed Robertson's book in the June 1916 issue of the Economic Journal. After noting that prize essays rarely make good books, Cannan quoted some of Robertson's more convoluted sentences to illustrate his point, concluding from this exercise that 'Mr. Robertson's defects are superficial, while his substance is sound' (Cannan 1916: 228). Cannan then picked on two main points in Robertson's work. First, in the context of 'miscalculations' which play such a major part in his theory, Cannan reminds us that the consequences of such miscalculations have very different temporal effects, which can range from a few days to quite a few years. Cannan's second point related demand fluctuations to the war, by then in its third year. In this context he noted that Robertson's book had been finished before the war had started, and that its author was on military service while it was being considered by the Trinity electors in justification for his election to a Trinity Fellowship. The review concludes on a strong, congratulatory note. The book is essential reading for those interested in the cycle, particularly since it is a valuable corrective for those who see the matter as essentially a monetary one. Robertson shows that fluctuations can arise from real causes alone, that is, even when money is perfectly stable, and that its contents must 'endanger the faith of even the most enthusiastic of money maniacs' (Cannan 1916: 229).

A notice published after the war in The Geographical Review by Ellsworth Huntington was somewhat more critical of Robertson's book. Although it conceded that industrial fluctuations had an important role to play in economic life in both the past and the future, Robertson's 'careless handling' of the topic in his book showed his ability 'to spoil a fine subject and largely nullify a great amount of careful research and clear thought'. Robertson's book is filled with interesting facts from British experience and that in other countries, discussed from a strong theoretical perspective. However, the book is poorly written, with convoluted sentences frequently displaying 'jargon' rather than 'scientific language'. An example is Robertson's stress on maximisation of satisfaction in the business situations of 'over-production' and 'under-production' which the book tackles. The concluding statement says it all: 'it is to be hoped that some day Mr. Robertson will put his interesting theories into such language that readers can concentrate their attention on the ideas and not be forced to expend it on the words'.

Schumpeter's History of Economic Analysis (1954: 1027-8) after drawing attention to the similarities between Robertson's (1915) work on business fluctuations and that by Spiethoff, and the need to compare the similarities between the work of the two on business cycles, only really draws attention to their difference in method. 'Spiethoff started, in the spirit of Juglar, from minute investigations of available statistics; Robertson worked first and last as a "theorist", taking only the broadest and most obvious facts as a base and concentrating on forging tools of interpretation'. Therefore, their work is complementary rather than competitive. But their general visions of the cyclical process and its causation were closely similar. It is for the theory it contains that Robertson's 1915 study was so highly original and virtually unique on the subject. Some of these theoretical innovations need to be briefly discussed in order to demonstrate why the book clearly became a 'classic' over the decades following its initial publication.

First of all, Robertson's book provided the first 'real' cycle in British economics, as distinct from monetary cycle analysis which by 1915 was quite common. Three major causal factors were identified by Robertson in this real cycle. These operated through providing stimulus to investment. Such emphasis on the important role of investment in generating a cycle was new in British literature when Robertson put it forward in 1915. The first of these factors was the important role assigned to invention in explaining the cycle, an argument reached by Robertson without assistance from Schumpeter's analysis (with which Robertson did not become acquainted until the late 1920s). This causal factor allowed Robertson also to stress different aspects of the cycle, depending on the nature of the underlying invention which had stimulated it. Robertson's book mentions the booms associated with railways (1872), the steel industry (1882), and the electricity industry (1902-1907). Subsequently, Robertson added the 1912 boom derived from the growing activity related to innovations associated with oil power.

The second causal factor was related by Robertson with the degree of confidence (or lack thereof) as an appropriate environment for encouraging (discouraging) investment, in which he expanded on Marshall's suggestions on this score. These introduced the psychological factor of relevance to the understanding of the business cycle.

The third causal factor was stimulus from increased demand for consumption goods, the satisfaction of which required new investment to enhance the economy's power of production. All three of these factors derived from the role of investment in increased production, which in itself expanded production and the capacity to produce.

This introduced another novel factor in Robertson's theory, the role of the accelerator or 'the relation' between output growth and investment growth. In his well-known history of the business cycle published for the League of Nations in the late 1930s, Haberler (1937: 87) gave Robertson credit for incorporating the accelerator into his theory of the business cycle. Robertson had encountered this first in the work of Aftalion in 1914, but only became gradually aware of its analytical powers. Robertson's 1915 book played these down, except as an explanatory factor for aspects of the boom. The various original factors, particularly in the analysis of investment and its role in output growth, were major features of Robertson's early cycle analysis. These made it a classic, the centenary of the publication of which deserves commemoration.

Peter Groenewegen, School of Economics, University of Sydney, NSW 2006, Australia. The author is indebted to two anonymous referees for comment.


Carman, E. 1916. Review of D.EI. Robertson, A Study of Industrial Fluctuation, Economic Journal 26 (June): 228-9.

Haberler, G. 1937. Prosperity and Depression. Geneva: League of Nations.

Hawtrey, R.G. 1913. Good and Bad Trade. London: Constable.

Hobson, J.A. 1910. The Industrial System: an Inquiry into Earned and Unearned Income, rev. edn. London: P.S. King.

Huntington, E. 1920. Review of D.H. Robertson, A Study of Industrial Fluctuation, Geographical Review 9 (March): 214.

Pigou, A.C. 1912. Wealth and Welfare. London: Macmillan.

Pigou, A.C. 1913. Unemployment. London: Macmillan.

Pigou, A.C. 1927. Industrial Fluctuations. London: Macmillan.

Presley, J.R. 1981. 'D.H. Robertson (1890-1963)', in D.P. O'Brien and J.R. Presley (eds), Pioneers of Modern Economics in Great Britain, London: Macmillan.

Robertson, D.H. 1915. A Study of Industrial Fluctuation: an Enquiry into the Character of the So-called Cyclical Movements of Trade. London: P.S. King.

Robertson, D.H. 1922. Money. London: Nesbit; and Cambridge: Cambridge University Press.

Robertson, D.H. 1949 [1926], Banking Policy and the Price Level: an Essay in the Theory of the Trade Cycle. New York: Augustus M. Kelley.

Robertson, D.H. 1963. Lectures on Economic Principles. London: Collins (The Fontana Library).

Schumpeter, J.A. 1954. History of Economic Analysis. London: George Allen and Unwin.

Skidelsky, R. 1992. The Economist as Saviour (John Maynard Keynes, vol. 2). London: Macmillan.
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Author:Groenewegen, Peter
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Date:Jan 1, 2015
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