Prosperity and Depression.pdf

Clap. ~Under-mullfIJption Theoriesconsequences as an increase due to a rise in the rate of voluntarysavings (without any change in the size and distribution ofincome).Hence, those writers whq lay the blame on high profits should alsotake objection to any rise in the rate of savings.This conclusion is, however, expressly rejected" Auto- by Mr. PREISER. He has the idea that a rise ofnomoNS " investible funds due to higher profits (he callsand " het,rfJ- this "heteronomous" saving) is a quite differentnomous " phenomenon from an increase due to a rise in thesaving. rate of saving from an unchanged income (CC autonomous"saving). While the first must lead toa collapse, he sees no reason why the second should not go onindefinitely. The difference is not only ofdegree, but also ofkind.It arises from the alleged fact that the appearance of profits makesthe misdirection of capital inevitable. In the case of autonomoussaving, it is the rate of interest which guides the entrepreneur inhis investment policy. The savings are directed over the capitalmarket, which guarantees a rational distribution. When profitsappear everywhere, the investor has to grope in the dark. Hehas lost connection," so to speak, with the demand of the ultimateconsumer; for" heteronomous " savings do not flow through thecapital market (pages 80 and'84). The pass~esquoted in an earlierfootnote show that the author does not make it clear what hemeans by misdirection .0£ capital; is there too much all round inrelation to aggregate consumers' demand, or too much in particularbranches at the expense of others?