the economy. Instead, the task falls to the National Bureau of Economic
Research (the NBER), a private research organization founded in 1920
for the purpose of documenting business cycles and developing a series
of national income accounts. In the early years of its existence, the bu-
reau’s staff compiled comprehensive chronological records of the
changes in economic conditions in many of the industrialized
economies. In particular, the bureau developed monthly series on busi-
ness activity for the United States and Great Britain back to 1854.
In a 1946 volume entitled Measuring Business Cycles, Wesley C.
Mitchell, one of the founders of the bureau, and Arthur Burns, a
renowned business cycle expert who later headed the Federal Reserve
Board, gave the following definition of a business cycle:
Business cycles are a type of fluctuation found in the aggregate economic
activity of nations that organize their work mainly in business enterprises:CHAPTER 12 Stocks and the Business Cycle 209
FIGURE 12–1
S&P 500 Index, Earnings, and Dividends during the Business Cycle, 1940 through December 2006