Burns-Mitchell diagram

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A Burns-Mitchell diagram showing the behavior of macroeconomic variables over the typical business cycle as a deviation from their peak values. The Burns-Mitchell diagram was published in 1946 by the US economists Arthur F. Burns and Wesley C. Mitchell and was named after them in the professional world.

background

The sharp fluctuations in economic activity in the rapidly industrializing economies of Europe and the US drew the interest of many economists in the early 20th century. In the 1920s and 1930s the National Bureau of Economic Research (NBER) was a center of such research in conjunction with renowned economists such as Gottfried Haberler , Simon Kuznets , Wassily Leontief or Allyn Young . A common view among these researchers was that the advent of powerful statistical methods made it possible to study economic phenomena in general, and business cycles in particular, in a more scientific way.

Two NBER researchers, Arthur Burns and Wesley Mitchell, were skeptical about the statistical approach, but were behind a data-based, descriptive assessment of the regularities of the business cycle. Mitchell had already written a book in 1927 that more or less drafted the research program, but together with Burns the project finally became a success after the Second World War. The idea behind this was to reduce the time series to a sequence of cycles and then examine the average behavior of other important variables over a number of periods before and after the peak of the average cycle. This highly data-intensive empirical approach, although considered modern and useful, has been criticized by some as "measurement without theory".

Identifying business cycles is always a difficult process with a degree of arbitrariness. Burns and Mitchell used monthly pre-war US records for industrial and agricultural production, durable and non-durable goods, interest rates, employment, wages, and food prices (an early substitute for GDP ). The results of their study at the time indicated that production, employment, wages, wholesale prices and interest rates are procyclical and consistent, while retail prices seem to be a little behind.

heritage

The Burns-Mitchell diagram was further refined in 2001 by Harding and Pagan.

Individual evidence

  1. ↑ Burda, Michael, Charles Wyplosz (2012): Macroeconomics - A European Text , 6th edition, Oxford: Oxford University Press, p. 547.
  2. ↑ Burda, Michael, Charles Wyplosz (2012): ibid , p. 13.
  3. ^ Mitchell, Wesley C. (1951): What Happens During Business Cycles , New York: National Bureau of Economic Research.
  4. ↑ Harding, D., A. Pagan (2001): Dissecting the Cycle: A Methodological Investigation , in: Journal of Monetary Economics, Vol. 49, No. 2.

literature

  • Burns, Arthur Frank, Mitchell, Wesley C. (1946): Measuring Business Cycles , National Bureau of Economic Research, Studies in business cycles.