The American Economic Review

Leading articles are marked (a); communications (c); papers read at the
annual meeting, published in the Supplement separately paged, are marked
(s); document notes (d); periodical abstracts (p); and all others are reviews.

Carlton, F. T., 366.

Carver, T. N., 69 (s), 590, 591.
Chaddock, R. E., 635.
Clapp, E. J., 48 (a).
Commons, J. R., 834.
Comstock, A., 259 (a), 488 (a).

Dadisman, A. J., 188 (p), 432 (p),
669 (p), 895 (p).

Day, C., 299 (a), 572, 811.

Dewing, A. S., 124, 125, 202 (p), 203
(p), 905 (p).
Doten, C. W., 133, 135.
Douglas, P. H., 106 (c).
Dowrie, G. W., 367, 369.

Duffus, W. M., 407 (d).
Duncan, C. S., 396 (d).
Fairchild, F. R., 785 (a).
Fairchild, H. P., 853.

vii

Ferguson, W. S., 801.

Fetter, F. A., 467 (a), 719 (a).
Fisher, W. C., 18 (a).

Fitzgerald, J. A., 92 (a).

Foerster, R. F., 112, 335, 341.

Ford, A. C., 186 (p), 342, 430 (p).
667 (p), 892 (p).

Ford, J., 855.

Furniss, E. S., 575, 806.

Gardner, H. B., 1 (a).

Goldenweiser, E. A., 401 (d).

Goldsmith, M. L., 104 (c).
Gottlieb, L. R., 652 (d).
Gras, N. S. B., 110, 581.
Haig, R. M., 1 (s).
Haney, L. H., 528 (a).
Hamilton, W. H., 889 (p).
Harris, E. P., 169.

Harris, H. J., 154, 156, 160, 213 (p),
452 (p), 914 (p).

Hewes, A., 577.
Hibbard, B. H., 345.

Hibbs, H. H., Jr., 149.
Howard, S. E., 546 (a).

Janes, G. M., 174, 605, 628, 837, 840,

Rich, E. J., 507 (a).

Robertson, J. A., 838.

Sakolski, A. M., 413 (d), 885 (d).

Saliers, E. A., 173 (d), 272 (a).

Schell, E. H., 129.

Seager, H. R., 602.

Secrist, H., 216 (p), 454 (p), 917 (p).

Shugrue, M. J., 196 (p), 352, 356,

870, 437 (p), 674 (p), 818, 903

(p).

Smith, M. A., 417 (d).

Snavely, T. R., 336.

Stone, C. L., 132, 829, 830, 854.

Streightoff, F. A., 367.

Swanson, A. E., 364.

Taussig, F. W., 33 (s), 596.
Taylor, H. C., 866 (d).

龍

Tosdal, H. R., 120, 194 (p), 437 (p),
673 (p), 820, 898 (p).

Vanderblue, H. B., 391 (d).

Watkins, G. S., 584, 608, 633.

Wehle, L. B., 868 (d).

Wildman, M. S., 611, 613.

Winston, A. P., 851.

Wolfe, A. B., 212 (p), 363, 388, 451
(p), 567, 640, 914 (p).

Wooster, H. A., 332.

Young, A. N., 185 (p), 430 (p), 844.

There can be no question that for the student of economics the war has been a distinct boon. The strain to which our economic system was suddenly subjected has thrown new light on its structure and working, has revealed weaknesses in current economic reasoning, and suggested new evaluations of the forces at work in economic life. Such an experience is bound to add to the body of economic knowledge and suggest new methods of approach to economic problems. That such has been the case there is abundant evidence in the papers and discussions at our annual meetings.

Some economists, indeed, seem to have lost faith in the general validity of the principles of economic science as it has been gradually built up since the time of Adam Smith, to believe that it must be in large measure discarded and an effort made to build on new foundations. There are various reasons for this feeling: the failure of economists to predict accurately the effect of the war upon the course of economic events; the progress made in the study of psychology and its bearing upon the understanding of the motives of human action; the feeling that economic reasoning has been based upon the assumption of the permanence of existing institutions, failing to recognize both that these institutions are subject to change and that they are themselves the controlling factors in economic life and should therefore furnish the main body of material for economic science. None of these criticisms is new but the proceedings of our recent meetings show that they are being urged with special force at the present time.

While no economist would for a moment suggest that his science. has reached, or ever will reach, its final form, while the experience through which we are passing and the criticisms to which reference has been made may contain contributions of great value to its progress, it may be questioned whether they are as destructive in their effect as some would appear to believe. Prediction is the severest test to which our knowledge can be put. It is possible 1 Presidential address delivered at the Thirty-second Annual Meeting of the American Economic Association held in Chicago, December 29, 1919.

only when the forces at work are few and their action thoroughly understood, i.e., within a narrow range of the phenomena of the external world. It is and always must be extremely uncertain in the field of human action where the forces at work are indefinitely numerous and but partially understood.

It is true that many economists as well as others underestimated the reserve labor power which modern nations can call into action and the extent to which they can readjust their economic machinery when the spirit of self-sacrifice and patriotic enthusiasm has been strongly awakened among their peoples, and that they therefore predicted that financial and economic exhaustion would end the war sooner than it did. But Europe was practically at the end of its resources, financial and economic, when the war closed. Fortunately the resources of our own country, when under these conditions they were thrown into the scale, turned the balance decisively and we were not called upon to undergo the test of endurance.

It is true that economists for the same reasons and because they failed to make proper allowance for the temporary effects of inflation, the influence of the newly established federal reserve system, and the possibilities of organized appeals to patriotism, predicted a rise in the rate of interest earlier than it actually occurred in this country, but they were right in their analysis of the fundamental influences at work. The rise has begun in the case of longtime investments, although in the case of short-time loans it is still retarded by the increase in our facilities for discount due to the establishment of the federal reserve system, the great importation of gold during the early years of the war, and the creation of some 25 billions of new securities in the form of public debt which have been made available as collateral for loans at low rates of interest. But even under these conditions the capacity of banks to loan is not inexhaustible and there are indications that this fact is beginning to be realized.

In 1914 I suppose practically all economists would have agreed that a war such as we have been through accompanied by a great expansion of money and credits and the destruction of wealth would cause a rise in prices to be followed by a fall after the close of the war. As a matter of fact, prices have continued to rise and today, in the light of experience with new forces, brought into operation by the war itself, many seem to doubt whether the fall will come. I venture to predict that here too, unless there is to

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