Meteorological or Sunspot Theory of Business Cycle

Meteorological or Sunspot Theory of Business Cycle:

This is the oldest theory of business cycles. It is associated with the name of W. Stanley Jevons, the celebrated British economist who in 1875 laid down the proposition that variations in the atmosphere of the sun, as evidenced in the frequency and magnitude of sunspots, determined the rhythmical fluctuations of business activity. At definite intervals, certain dark spots appeared on the face of the Sun which affected the transmission of heat to the earth. This affected the agricultural crops which, in their turn, influenced the level of business activity in the economy. When the agricultural crops failed consequent upon the appearance of sunspots, the entire economy would be engulfed in a depression, the reason being that agriculture was an important branch of production. The depression in the agriculture sector soon spread to other sectors, and the entire economy became depressed. On the other hand, if the spots did not appear on the Sun and the rainfall was good there might be excellent harvests in the country, giving rise to a period of prosperity for the people. The variations in the rainfall, it was pointed out, were so regular that periods of poor harvests often alternated with periods of good harvests. Consequently, a period of depression was often followed by a period of boom.

Prof. Henry L. Moore has discovered an eight-year cycle of rainfall in America which, according to him, causes variations in the yield of agricultural crops. The cycle of rainfall determined the cycle of crops, and the cycle of crops, in its turn, determined the cycle of business activity. Thus, according to this theory, agriculture is the medium through which meteorological influences are transmitted to other sectors of the economy.

The meteorological theory is not accepted these days as giving a valid explanation of the complex phenomenon of the business cycle. It lacks scientific character. The so-called sunspots are nothing more than a flight of imagination. Their existence has not been scientifically established. Further, if we accept the theory, the industrialized countries should be immune from the operation of the business cycle, because agriculture is not an important branch of production in these countries. The fact, however, is that non-agricultural, industrialized countries suffer more from fluctuations in business activity than agricultural countries. Moreover, the meteorological theory cannot satisfactorily explain the various phases of the business cycle.

And yet the meteorological theory cannot be lightly dismissed as of no account. There do seem to be crop cycles and it is reasonable to suppose that these crop cycles do have their repercussions upon business activity as a whole.

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