Prosperity and Depression.pdf

CHAPTER 5CNDER-CO~SU~IPTIONTHEORIES§ I . I~TRODUCTIOl'The under-consumption theories have a longHistorical history. In fact, they are almost as old as the sciencebackground. of economics itself. Lord LAUDERDALE, MALTHUSand SIS:MONDI are prominent among the earlyadherents of this school of thought. The authors who have donemost in recent times to re-state and propagate the under-consumptiontheory in a scientific \vay are Mr. J. A. HOBSON l in England,Messrs. W. T. FOSTER and \Y!. CATCHINGS 2 in the United States,and Professor Emil LEDERER 3 in Germany.. The cruder versionsof the theory, which exist in innumerable varieties in all countries,will not be considered here, as their fallacy has been clearly demonstratedon various occasions. 51 See The Industrial System., London, 1909, 1910 : Economics 01 Unemploytnent,1922 ; Ra.tionalisation and Unemployment, London, 1930.• See Money, Boston, 1923 ; Profits, Boston, 1925 ; The Road to Plenty,Boston, 1928.• "Konjunktur und Krisen" in Grundriss der Sozialokon01nie, Tiibingen,1925 ; Technischer Fortschritt und Arbeitslosigkeit, Tiibingen, 1931.t While not himself primarily an advocate of the underconsumptionthesis, Mr. Keynes. has laid great stress on the deflationary cha~acterof acts of saving. In the General TheO'rY 01 Employment, Interest and.J.'loney, London, 1936, he has forged, in the concept of the U propensityto consume" an instrument apt for the purposes of the underconsumptiontheory. The implications of this concept have been more fullydeveloped by Mr. Harrod in his work, The Trade Cycle, Oxford, 1936.• For example, by E. F. ~I. Durbin's Purchasing Power and TradeDepression, London, 1931, and H. Gaitskell's contribution to WhatEverybodv wants to know about Money, ed. by G. D. H. Cole, London,1933, pages 348 et seq.