The demand for certain classes of goods is incapable of much fluctuation because they are necessities. Fluctuations do occur in agriculture, commerce and finance but within quite narrow limits. Also construction work is quite constantly demanded to an amount necessary for maintenance, replacements and such extensions as are made necessary by the growth of population. There is, however, a certain amount of construction that may be called "extra" or "optional" or "investment construction." Investment construction is undertaken only when the investor sees in it the prospect of liberal profit. In a time of low prices far-seeing investors enter into contracts for a large amount of construction work. Their lead is followed by others and the resulting demand for construction materials creates a boom in the industries immediately affected. Of these, iron and steel are the most important.

In a short time contractors discover that they are obligated in excess of their capacity. Labor and materials cannot be secured on terms that make possible the fulfillment of agreements on contract time and as rapidly as this is realized wages and prices rise. Again the far-seeing ones take the lead, this time by ceasing to enter into fresh agreements. Plans for extension are deferred and those lines of business that furnish construction materials such as iron, steel, cement and lumber, face a falling off in the demand for their products. Laborers on construction enterprises also face shorter hours, reduction in wages or dismissal. A large volume of contracts brought on the period of prosperity and now the reduction in their volume brings depression. Prices and wages fall until the possibility of large profits is again tempting and a new cycle is started. We may quote Mr. Hull as follows for a brief summary of his view:

We recognize the due influence of everything which tends to increase or decrease the volume of the industries. We claim, however, that after a country has become chiefly manufacturing, no combination of favorable influences has been strong enough to develop a boom, except on low prices of construction, and that after abnormally high prices develop, no combination of favorable influences has been strong enough to keep the boom going beyond the time necessary to complete the volume of extra construction made up of old, low-priced contracts. The remedy needed is described thus:

The remedy we suggest is the inauguration by the national government of a system for collecting and publishing monthly all pertinent information in relation to the existing volume of construction under contract for future months, and all

pertinent information in relation to the capacity of the country to produce construction materials to meet the total demand thus indicated.

We may now turn to the fourth illustration of this particular class of theories. Professor Wesley C. Mitchell's work called Business Cycles is the most voluminous and painstaking analysis that has appeared for some time. Professor Mitchell finds that crises have no regular period of recurrence, that business cycles do not always pass without interruption through the same round of prosperity, crisis and depression, that there are many variations in intensity and that no two periods show exactly the same combinations of elements. There are diversities due to influences arising from other than business sources, among which are the weather, earthquakes, war, epidemics and tariff changes.

A correct explanation of the persistent, recurring causes, however, must rest upon a recognition of the fact that "the industrial process of making and the commercial process of distributing goods are thoroughly subordinated to the business process of making money." Business activity passes through cycles. Starting with the period of depression we find a relatively low level of prices, reductions in business costs, narrow margins of profits, moderate stocks of goods, cautious buying and business conservatism. Accumulated stocks of goods, however, are finally exhausted. Demand gradually revives encouraged by the continued growth of population, new tastes among consumers and new methods among producers. Most important of all there is a revival in the investment demand for industrial equipment. Low rates of interest encourage borrowing, contracts may be let to advantage and capitalists become less timid as memories of the crisis grow less distinct.

Expansion in certain active trades or in a certain section or sections creates a demand for materials that must be purchased "from other enterprises, the latter from others, and so on without assignable limits." Family incomes expand, consumers' demands increase and "soon or late this expansion of orders reaches back to the enterprises from which the impetus to greater activity was first received, and then this whole complicated series of reactions begins afresh at a higher pitch of intensity." Optimism spreads and the expansion is still further encouraged.

Those enterprises whose order books are well filled stand out for higher prices on new orders, even in highly competitive lines,

since beyond a certain point more business can be handled only after heavy investments in new equipment. Some prices however rise more rapidly than others, retail prices lagging behind wholesale, consumers' goods behind producers' goods, etc. Wages rise less than wholesale prices and stocks more rapidly than commodities. The growing physical volume of sales combined with these variations in price fluctuation result in larger profits and in the presence of growing business optimism there is a marked expansion of investments. Prosperity becomes intense.

But this prosperity breeds a crisis. Business costs increase because of the heavy expense of adding to equipment or of bringing antiquated properties back into use. Wage payments increase in standard rate and because of the higher cost of overtime. Overtime brings weariness and labor efficiency declines. Numerous small wastes are multiplied in the hurry to bill orders. There is also an increasing tension in the investment and money markets which adds to costs and lowers profits because of the higher interest rate and because many enterprises must be abandoned.

To offset these encroachments of costs upon profits, selling prices must, if possible, be raised still further. In certain lines of business, however, this cannot easily be done. Demand for new goods, especially at higher prices, cannot be stimulated sufficiently to prevent a loss. Sharp contrasts thus develop. A growing number of enterprises face declining profits. Worse than the necessity of passing dividends is the appearance of doubt concerning outstanding credits. Business credit is based primarily upon the capitalized value of present and prospective profits. Cautious creditors refuse renewals and press for settlement of accounts.

Desire to secure profits soon becomes subordinated to the necessity of maintaining solvency. Financial resources are conserved. Outstanding liabilities are provided for and efforts to push sales are checked. The volume of orders lessens, expansion gives way to contraction, and discount rates rise. The crisis is on and may or may not degenerate into a panic. A period of depression follows and another business cycle is soon under way.

This paper aims merely to present a few of the leading theories of crises, those reviewed being the ones that appear to the writer most typical and most valid. In recent years many new explanations have been offered but a review of more of them is impracticable.

The reader who is interested will find a valuable summary of the most recent in Mitchell's Business Cycles. 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.

TAXATION OF LAND AS A REMEDY FOR

UNEMPLOYMENT

BY BOLTON HALL,

New York City.

From its nature the taxation of land values must come gradually. Were its sudden introduction possible, it would make a serious disarrangement of existing conditions. In early days there was nothing to tax except personal property, for as long as the best land was still to be had free, land had little selling value. Consequently, the state taxed personal property as well as it could, and the difficulties of doing so were not so great as under the present complicated conditions.

Neither was there at that time any unemployment problem, the land being as open as it was to Adam or to Robinson Crusoe, so that no man could be out of work until at least all of his attainable desires were satisfied. This was true even in the early history of this country, when the Pilgrim fathers arrived. If anyone had complained that he was out of work, those grave Puritans would have laughed at him. They would have said, "clear those fields," "pile up those stones," "cut that timber," "plow this soil," "build a log house," "get some sea weed for manure,' "catch fish" or "haul sand!" "Why there are thousands and thousands of things to be done. Do any of them, and we will give you not only food and shelter and clothing, but much more, in exchange for your work." In those days a proposal for the cultivation of vacant lots for the unemployed would have seemed funny; now it seems only sad that the land cannot be had for the purpose, while there are lands idle around every city, which could employ directly or indirectly every idle man in those cities, could its use be obtained.1

Accompanying the restriction of the use of the natural opportunities due to monopoly is of course lowered wages for some and fierce rivalry not only for the sale of goods but for jobs, a rivalry which has the curious effect of making a cut-throat competition New York city has 198,000 vacant lots, many of which contain many

acres.