Economics: An Introduction to Traditional and Progressive Views
Howard J. Sherman, E.K. Hunt, Reynold F. Nesiba, Phillip A. O'Hara, Barbara Wiens-Tuers · 2008 · 761 pages
This is a 761 page college economics textbook, not a market timing book. It has one genuinely useful piece for a trader: Wesley Mitchell's method for dating business cycle peaks and troughs and tracking any indicator's position inside a cycle.
The one idea
The book's actual mission is to teach macroeconomics twice: once through the neoclassical lens taught in every other textbook, and once through a Marxist, institutionalist framework the authors call progressive economics. Chapters run in matched pairs, a neoclassical treatment of a topic followed by a progressive rebuttal, on labor markets, monopoly power, inflation, and the business cycle. For a trader looking for market-timing tools, most of this is irrelevant.
The one chapter worth pulling out is Chapter 41, How to Measure Instability, which lays out economist Wesley Mitchell's method for locating where the economy sits inside a business cycle. Mitchell divided each cycle into nine numbered stages: stage 1 is the initial trough, stage 5 is the peak, stage 9 is the final trough, and stages 2 through 4 and 6 through 8 split the expansion and contraction into equal thirds. Any economic series (investment, unemployment, capacity utilization) can be plotted against those nine stages and compared cycle to cycle using a normalized cycle relative.
The book also documents, with actual Bureau of Economic Analysis and Bureau of Labor Statistics data, how unemployment and capacity utilization behave in opposite ways over a cycle, and how price behavior around recessions changed permanently after the 1950s (the stagflation chapters). That descriptive material is useful context for reading macro releases, but it is not a system, a signal, or a rule set.
What it actually teaches
Mitchell's cycle-staging method, as the book lays it out in Chapter 41, works as a five-step calculation on any economic time series.
DATE THE PEAKS AND TROUGHS
Use quarterly data (the book cites 1970.4 as an example format, meaning Q4 1970) to find the business cycle peak (highest point of aggregate business activity) and the two troughs bracketing it. The book counts 32 full business cycles in the U.S. from 1854 to 2007, averaging 36 months of expansion and 17 months of contraction, 55 months total, with real cycles running from as short as roughly a year to a decade.
DIVIDE THE CYCLE INTO NINE STAGES
Stage 1 is the initial trough, stage 5 is the peak, stage 9 is the final trough. Each of those three is exactly one quarter long. The expansion between stages 1 and 5 is split into three equal-length stages (2, 3, 4). The contraction between stages 5 and 9 is split into three equal-length stages (6, 7, 8), regardless of how long the actual expansion or contraction ran.
CALCULATE THE CYCLE BASE
Average the series (say, gross domestic private investment) across all data points in one full cycle. The book's worked example uses the 1991-2001 cycle: aggregate real investment averaged $1,297 billion per quarter across that cycle. That average is the cycle base.
CONVERT EACH STAGE TO A CYCLE RELATIVE
Divide the value at each of the nine stages by the cycle base, then multiply by 100. In the worked example, investment at stage 1 (initial trough) was $809 billion; 809 divided by 1,297 times 100 equals a cycle relative of 62, meaning investment at that trough ran at 62 percent of the cycle's average level. By stage 5 (peak) the same series reached a cycle relative of 128.
COMPARE SERIES AND COMPARE CYCLES
Because every cycle is rescaled to the same nine stages and normalized against its own base, you can overlay investment, unemployment, or capacity utilization from different decades on the same nine-point axis and see which move with the cycle and which move against it. The book shows capacity utilization rising through every expansion and falling through every contraction, while the unemployment rate does the mirror opposite.
What it looks like Monday morning
Nothing in this book changes what a trader does before the market opens on Monday. There is no entry rule, no signal, no position sizing framework, and the authors never claim to offer one; this is an undergraduate macroeconomics survey. What a reader can actually take from it is a way to talk about where the economy sits in a cycle without hand-waving: instead of saying the economy feels late-cycle, you can date the last trough and peak, split the interval into Mitchell's nine stages, and say specifically that a given indicator (capacity utilization, say) is at stage 7 of a typical cycle and running below its own cycle-average level.
That framing is more useful for reading a Fed release or a jobs report in context than it is for setting up a trade. Anyone expecting entries, stops, or a rule that flags a top or bottom should look elsewhere; this book was never written for that job.
| Stage | Phase | Investment ($B) | Cycle relative |
|---|---|---|---|
| 1 | Initial trough | 809 | 62 |
| 2 | Expand | 960 | 74 |
| 3 | Expand | 1,235 | 95 |
| 4 | Expand | 1,643 | 127 |
| 5 | Peak | 1,662 | 128 |
| 6 | Decline | 1,584 | 122 |
| 7 | Decline | 1,573 | 121 |
| 8 | Decline | 1,563 | 121 |
| 9 | Final trough | 1,490 | 115 |
Cycle base (quarterly average across the full cycle) was $1,297 billion; each cycle relative is the stage value divided by that base, times 100.
A recession is when the other guy is out of work; a depression is when you are out of work.Sherman et al., Economics
Where it fails
- It is not a trading book and does not pretend to be. There is no chapter on markets, price forecasting, or timing. A reader who buys it hoping for an edge in reading indicators for trade decisions will find one usable measurement method (Chapter 41) buried inside 761 pages of college macro and micro theory, history of economic thought, and a running Marxist-versus-neoclassical debate.
- Half the book is a parallel-track ideological argument, not indicator content. Nearly every macro topic (unemployment, inflation, business cycles, government policy) is covered twice: once as conservative or neoclassical theory, once as the authors' progressive rebuttal. That structure is the book's stated purpose and it is done seriously, but it roughly doubles the page count a reader has to get through to reach the descriptive, data-driven material.
- The core dataset stops at 2005-2007, this edition's own data. The GDP breakdown, national income tables, and the five-cycle average of unemployment and capacity utilization in Chapter 41 all run through the 1970-2001 or 2005 data available at the 7th edition's 2008 publication. The 2001 recession is the most recent cycle discussed; the 2008 financial crisis, the 2020 pandemic recession, and everything since are absent because they happened after or right at publication.
- Mitchell's nine-stage method assumes you already have clean, dated, quarterly series and the patience to normalize them by hand. The book walks through the arithmetic (cycle base, cycle relative) but does not supply a tool, spreadsheet, or software to do it. A reader has to pull BEA or BLS series themselves, date the cycle turning points, and build the normalization, which is exactly the kind of unglamorous data work that keeps casual readers from ever using the method.
- The unemployment and inflation statistics reported here are the book's own critique target, so treat every headline number as contested. The authors spend real space arguing the official unemployment rate understates true joblessness because it excludes discouraged workers and counts anyone working one hour a week as employed. That is a fair methodological point, but it means the book gives you two different numbers to reconcile (the official series it uses for its own charts, and its own argument that the series is wrong) without resolving which one to actually trade or plan around.
Who it is for
Buy it if
You are a student or self-learner who wants a single-volume survey of both mainstream and heterodox macro and micro theory, or you specifically want Wesley Mitchell's cycle-staging method explained with a worked numeric example. It is a legitimate textbook for that use.
Skip it if
You are looking for anything that touches entries, exits, position sizing, or reading indicators for a trade decision. This is an economics course in book form, not a market or indicators handbook, and the one measurement method worth extracting (Chapter 41) is a small fraction of the total page count.
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