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13 Int'l Lab. Rev. 785 (1926)
A Statistical Relation between Unemployment and Price Changes

handle is hein.journals/intlr13 and id is 789 raw text is: INTERNATIONAL LABOUR REVIEW VOL. XIII. No. 6 JUNE 1926 A Statistical Relation between Unemployment and Price Changes by Professor Irving FISHER, Professor of Economics, Yale University The possible relation between changes in the price level and changes in the volume of employment, much discussed by economists at the present time, has already been debated in the pages of the Review. In the present article Professor Fisher, one of the foremost authorities on monetary problems and for years a protagonist of stabilisation, removes the question from the sphere of controversy to that of exact statistical research. He has found a remarkably high correlation between the rate of price changes and employment, and he describes the methods by which he has achieved this result. The data used refer exclusively to the United States, and further research would be required before the conclusions could be applied directly to other countries. Nevertheless, this objective statistical confirmation of a relation long asserted to exist is a highly important step in advance. N a matter as intensely human as the employment problem it seems a far cry from money and banking to an explanation of why working men are thrown out of jobs. And yet, in the signifi- cant period 1915-1925, analysis shows a Pearsonian correlation as high as 90 per cent. between the rate of change in the value of the dollar and unemployment in the United States. The fact that deflation causes unemployment has been well recognised for many years in isolated instances, such as the great deflation of 1921 in America or the corresponding post-war deflation in Great Britain, Czechoslovakia, or Norway. It has likewise been recognised that inflation carries with it a great stimulation to trade and an increase in employment (or decrease in unemployment). And yet, strange as it may seem, when applied to the so-called business cycle , these relationships have been almost wholly overlooked. When, for instance, Mr. Hoover had his committee of experts study unemployment and make a report to him three years ago, almost every other factor that might

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