The League of Nation, and the making of Haberler's Prosperity and Depression

In October 1930, the General Assembly of the League of Nations resolved that the Economic and Financial Organisation of the League "should undertake the study of the course and phases of the present depression and the circumstances which led up to it, and for this purpose it should collect the information compiled by institutions already in existence in different countries, centralise such information and, where necessary, fill up any gaps that exist. For this purpose the Economic and Financial Organisation [...] should put itself in touch with national organisations whether consultative or planning councils or research institutions concerned with this matter, and should further, with their aid, consider by what means the work now being conducted on the problem of the recurrence of periods of economic depression may be co-ordinated".

Both the Economic and the Financial Committees interpreted the mandate as consisting in two wholly distinct parts, one concerned with the present depression and the second regarding the broader problem of the recurrence of economic depressions. The former problem was tackled first: the League organized three meetings with representatives of various 'conjuncture institutes', on the basis of memoranda submitted by the latter. The result of the discussions was presented in a Report presented to the Assembly by Bertil Ohlin: The Course and Phases of the World Economic Depression, published by the League in 1931.

The problem of the recurrence of economic depressions was approached later, by means of a complex analysis and synthesis of the existing theories of the trade cycle, conducted by Gottfried Haberler between 1934 and 1937, and continued by a statistical analysis led by Jan Tinbergen in 1936-1938.

Meanwhile (in 1937) the Assembly encharged a Delegation with proposing remedies. Accordingly, a Delegation on Economic Depressions was formed in 1938, it met three times and had prepared a preliminary draft for a Report which, however, was not published due to the outbreak of the war. The draft report, however, was not left dormant but was further elaborated by Alexander Loveday (the Director of the Economic and Financial Section of the League) in view of the problems raised by the conflict, and eventually perfected by the Delegates who reported in two volumes: The transition from war to peace economy and Economic stability in the post-war world.

All four branches of research were conducted with a common method: meetings were held with experts in the respective fields, with the participation of a number of officiers from the League (Loveday, in particular, was personally involved in most discussions) and the International Labour Office, and the results (on the basis of extensive minutes) were elaborated upon and summarized by one of the experts. The reports were thus the results of a somehow collective enterprise, regarding which an abundant documentation is extant enabling one to follow the process of elaboration in most of its stages.

While Ohlin's volume is mainly concerned with the topical events leading to a specific depression (important as it was), and is therefore mainly of an historical character, and while the outcome of the Delegation on Economic Depressions' work was mainly concerned with practical issues (and was eventually deflected into a different, though related, kind of problem), Haberler's and Tinbergen's inquiries retain a considerable theoretical interest --mainly for the history of economic thought, but also for the light they throw on the foundations and methodology of contemporary theoretical analysis of cycles.

Haberler's project consisted in the analysis of existing trade cycle theories, and a subsequent synthesis. On top of the procedure outlined above, Haberler's method included an additional element that makes his work particularly interesting. He began by drafting a short report (about 50 pages) with an analysis of a number of theories, which he circulated among some 50 economists (but more subsequently asked for copies) who were asked to comment. Haberler's correspondents represented the who's who in trade cycle theory at the time, and their comments taken as a whole --regarding either misinterpretations of their own writings, or suggestions for additions, or theoretical issues-- offer a very detailed picture of the state of trade cycle theory in the early 1930s (which, needless to say, was about to reach its peak). Haberler proceeded by elaborating the suggestions offered by his colleagues, and prepared a much larger draft (about 350 pages), also including an attempted synthesis of the theories analysed in the first part, the structure of which (but not the details) was retained for the final version, a volume titled Prosperity and Depression that was considered for decades the standard account of the subject. The draft was again discussed with experts, on a smaller basis than before, in a conference held at Annecy in July 1936.

A few days before this conference another meeting was held, to decide in which form should the enquiry be continued. Tinbergen was encharged with statistical testing of trade cycle theories, and Robertson was encharged with advising. They produced a large interim report, which was the basis for subsequent meetings with experts (one of which held in Geneva in September 1937, a second one was held in Cambridge in August 1938 ) and was the subject of extended correspondence among economists and League officials. The results were eventually published as Statistical testing of business cycle theories in 1939.

These debates are also of interest for both the theoretical and methodological issues they touched. On the one hand the statistical method of the econometricians was still in its infancy, and received an enormous boost by Tinbergen's analysis. On the other hand, the methodological debate between Keynes and Tinbergen is still discussed today in the literature.

Besides the intrinsic significance of each of these lines of research, which also involves issues relating to the very idea of a synthesis of trade cycle theories (on which some authors agreed while others violently disagreed ) and a number of technical matters, an additional reason for interest in this inquiry lies in the drastic change of approach between the two stages of the project. Haberler was one of the last representatives of the 'verbal' treatment of trade cycles: the theories he studied, and his own synthesis, were all worked out in terms of loose (and correspondently rich) relationships between variables, while Tinbergen was among the first representatives of a mathematical modelling approach to the cycle, in which the relationships between variables are precisely stated but at the same time very rigid. The League seems to have been aware of this methodological clash, as Robertson (one of the great representatives of the 'verbal' tradition) was asked to keep an eye on Tinbergen's work. The League's inquiry thus comes at a breaking point in the development of trade cycle theories, and the transition is itself worth exploring.

Daniele Besomi is editing the correspondence and the documents relating to the conception, the writing and the discussion of Haberler's Prosperity and Depression.

Daniele Besomi will inquire on the Rockefeller Foundation's involvement in the financing of the League's inquiry and of the work, to some extent coordinated by the League, of the various 'business cycle barometers' institutes.

This project is related, because of the League's and the Rockefeller Foundation's direct involvement, to the business cycle barometers project.