Mitchell, Wesley Clair

views updated Jun 11 2018

Mitchell, Wesley Clair 1874-1948

Wesley Mitchell pioneered the empirical study of business cycles. A founder of the National Bureau of Economic Research, he was one of the major figures within the institutionalist movement in American economics.

Mitchell was born in Rushville, Illinois, and brought up in Decatur, Illinois. He entered the new University of Chicago in 1892, obtaining his AB degree in 1896 and his PhD in 1899. At Chicago he came under the influence of Thorstein Veblen and John Dewey, but it was J. Laurence Laughlin who supervised his PhD dissertation, published in 1903 as A History of the Greenbacks. In that year Mitchell moved to the University of California at Berkeley and then to Columbia University in New York in 1913. Except for a brief period at the New School for Social Research (1919–1922), which he helped to found, he remained at Columbia until his retirement in 1944. He was also director of research for the National Bureau of Economic Research (NBER) from its founding in 1920 until 1945 and a major figure in the founding of the Social Science Research Council (SSRC).

Mitchell wrote on many subjects, including rationality and economic activity (Mitchell 1910), the economics of the household (1912), the history of economics (1918), the distinction between making money and making goods (1923), and the links he saw between institutional and quantitative economics (1925), but Mitchell’s major work was his 1913 book Business Cycles. Here Mitchell provided an “analytic description” of the course of business cycles consisting of four stages, with each stage setting the conditions for the next, and the cycle as a whole growing out of the institutions of the “money economy” in the form of the interaction of business decisions based on profit expectations, the behavior of the banking system, and the leads and lags in the movement of wages and prices. The book also commented on the shortcomings of many of the existing theories of the cycle.

After 1922 Mitchell continued his own work on cycles through the NBER. The original plan was for two books, later expanded to three. The first, Business Cycles: The Problem and Its Setting (1927), discussed existing theories and statistics and laid out the research agenda. The project grew, and with it a vast number of studies of particular aspects of the cycle and an array of measurement issues relating to timing, amplitude, and rates of change across successive cycles. This eventually resulted in the development of the “NBER method” of specific and reference cycles (Morgan 1990, pp. 44–56), presented in detail in the second book, Measuring Business Cycles (1946), coauthored with Arthur F. Burns. The final volume, which was supposed to be a theoretical volume, was never completed, although a part was published after Mitchell’s death as What Happens during Business Cycles (1951).

Measuring Business Cycles was sharply attacked by Tjalling Koopmans of the Cowles Commission for engaging in “measurement without theory” (Koopmans 1947, p. 161). Mitchell did of course use theories as a guide to what data should be collected and examined, but he was not enthusiastic about enamored econometric methods.

Mitchell’s great contribution was in the development of empirical research in economics, not only through his own work but also through the work he promoted via the NBER and SSRC. As Jeff Biddle pointed out in 1998, for Mitchell, it was only through such research that economics could become a useful tool in the solution of economic problems.

SEE ALSO Business Cycles, Real; Koopmans, Tjalling

BIBLIOGRAPHY

PRIMARY WORKS

Mitchell, Wesley Clair. 1903. A History of the Greenbacks, with Special Reference to the Economic Consequences of Their Issue, 1862–65. Chicago: University of Chicago Press.

Mitchell, Wesley Clair. 1910. The Rationality of Economic Activity. Pts. 1 and 2. Journal of Political Economy 18 (February): 97–113; (March): 197–216.

Mitchell, Wesley Clair. 1912. The Backward Art of Spending Money. American Economic Review 2 (June): 269–281.

Mitchell, Wesley Clair. 1913. Business Cycles. Berkeley: University of California Press.

Mitchell, Wesley C. 1918. Bentham’s Felicific Calculus. Political Science Quarterly 33 (June): 161–183.

Mitchell, Wesley C. 1923. Making Goods and Making Money. Reprinted in The Backward Art of Spending Money. 1950. New York: Augustus M. Kelley.

Mitchell, Wesley C. 1925. Quantitative Analysis in Economic Theory. American Economic Review 15 (March): 1–12.

Mitchell, Wesley Clair. 1927. Business Cycles: The Problem and Its Setting. New York: National Bureau of Economic Research.

Mitchell, Wesley Clair. 1951. What Happens during Business Cycles: A Progress Report. New York: National Bureau of Economic Research.

Mitchell, Wesley Clair, and Arthur F. Burns. 1947. Measuring Business Cycles. New York: National Bureau of Economic Research.

SECONDARY WORKS

Biddle, Jeff. 1998. Social Science and the Making of Social Policy: Wesley Mitchell’s Vision. In The Economic Mind in America: Essays in the History of American Economics. Ed. Malcolm Rutherford, 43–79. London: Routledge.

Koopmans, Tjalling C. 1947. Measurement without Theory. Review of Economic Statistics 29 (August): 161–172.

Mitchell, Lucy Sprague. 1953. Two Lives: The Story of Wesley Clair Mitchell and Myself. New York: Simon and Schuster.

Morgan, Mary S. 1990. The History of Econometric Ideas. Cambridge U.K.: Cambridge University Press.

Malcolm Rutherford

International Encyclopedia of the Social Sciences

Wesley Clair Mitchell

views updated May 18 2018

Wesley Clair Mitchell

The American economist Wesley Clair Mitchell (1874-1948) was one of the most prominent contributors to the study of business cycles and was also among those who first recognized the importance of sound empirical research in economics.

Born on Aug. 5, 1874, in Rushville, III., Wesley C. Mitchell was the eldest son of a Civil War veteran. Despite material difficulties, Mitchell completed his college and graduate education at the University of Chicago, receiving his doctorate in 1899. He married Lucy Sprague in 1912. His main activities, research and teaching, were only briefly interrupted, mainly for government service. During one such interlude, in 1914, Mitchell wrote a highly influential monograph, The Making and Using of Index Numbers, for the U.S. Bureau of Labor Statistics.

Analyzing the Business Cycles

Mitchell's major treatise, Business Cycles (1913), represents a pioneering effort to provide an "analytic description" of the pervasive and recurrent but also complex and changing fluctuations that are observed in the modern, highly developed, and interdependent "money economies." He developed a concept of the business cycle as a self-generating process whose continuity and diffusiveness are due mainly to institutional responses of the economic system to a variety of unpredictable changes. The lags in these responses, for example, the lags of expenditures behind receipts, of selling prices behind buying prices, or of investment expenditures and deliveries behind investment decisions, are of strategic significance in the dynamics of the cycle. A central issue is the dependence of tides in business activity upon the prospects of profits or, as in times of crisis, the quest for solvency.

As cofounder, and from 1920 to 1945 as director, of the National Bureau of Economic Research, a private, nonprofit institution, Mitchell effectively promoted the testing of his ideas and findings, which was essential for understanding and solving many basic economic problems. The first book that resulted from this reexamination was Business Cycles: The Problem and Its Setting (1927), which drew on a much larger mass of evidence than was previously accessible and which confirmed many of Mitchell's earlier impressions about the basic nature of business cycles and the methods appropriate for their study. A full account of these methods was presented in Measuring Business Cycles (1946), a volume written jointly by Mitchell and Arthur F. Burns. In his last major work, What Happens during Business Cycles: A Progress Report (published posthumously in 1951), Mitchell showed how the cycles consist not only of roughly synchronous rises and falls in many activities but also of numerous specific rises (falls) that start while expansion (contraction) is still dominant in the economy at large. This work paved the way for research on uses of cyclical indicators in the analysis of current business conditions and short-term forecasting.

Mitchell served by presidential appointment on national committees on social trends (1929-1933), cost of living (1944), and others. He had strong humanitarian sympathies and believed that advances in economics and other social sciences can and should help to reduce such defects of the economic system as recurrence of depressions and unemployment, inequality of opportunity, concentration of power, and material insecurity. Mitchell died on Oct. 29, 1948.