Prosperity and Depression.pdf

144 Analysis of ThloriI.r Part -Iand the price of the means of production. cc Price" and cc cost"are economic terms : but what the economist is concerned withinall but a few unimportant limiting cases-is expecteJ futureprices and cost. The prices, costs, profit margins, etc., by whichthe producer is guided in his decision, should be conceived of,in short, not simply as given factors, but as factors expected to rulein the future. 1 This is so even in the simplest case-the case whichseems to underlie a large part ofstatic theory-where the produceris guided in his decisions solely by current prices. Prima fade, itmight seem that in this case no element of expectation is present.But this is not so : the expectation in this case is the hope or beliefthat current prices! will continue to dominate the future.1 In recent years, it has become fashionable to lay stress on theelement of expectation. Keynes' General Theory of EmplO'yment, Interestand Atone)' is conceived in terms of expectation: and, at an earlier dat.e,the concept of economic ~xpectation was interpreted and developedby the Swedish school (especially E. Lindahl, G. Myrdal and B. Ohlin:see Myrdal's report on this Swedish literature in his article U DerGleichgewichtsbegrifials Instrument der geldtheoretischen Analyse It inBeit"iige zu,. Geldtheorie, edited by Hayek, Vienna, 1933 : see also a numberof articles by J. R. Hicks, viz., "Gleichgewicht und Konjunktur" in ZeilscnnjtfUr Nationalokonomie, Vol. IV, NO.4, 1933, pages 441 et seq. : "ASuggestion for simplifying the Theory of Money" in Eccnuwnica, February1935, page 1; and IIMr.Keynes' 'General Theory of Employment, Interestand !.foney'" in Economic Journal, Vol. XLVI, June 1936). It shouldnot, however, be forgotten that even the theories of authors whQ do notusually refer explicitly to expectations and, anticipations can, and should,be interpreted in terms of expectation, as the authors in question arethemselves often well aware (cl., for example, Hayek's article "Preiser·wartungen, monetAre Storungen und Fehlinvestitionen U in N aIiottalekonomiskTidsskrift, Vol. 73, pages 176-191-French translation" Pr6visioDde prix, perturbations monetaires et faux investissements" in Revw disScienus economiques, 1935). Professor Morgenstern has a trenchantanalysis of the problem of expectations and anticipations in his Wi",­schaftsP"og,l,ose, eine Untersuchung ih"ef' l'orausset.r·ungen unil M oglie.·keiten, Vienna, 1928, and his article" Vollkommene Voraussicht undwirtschaftliches Gleichgewi~gt'" in Zeitsdlri/t tilt' NatiO'JUllOk~,Vol. VI, Vienna,· 1935, pages 337-358.• The reference in this case is to prices : but what is true of prices isequally true of other factors in economic decisions. In perfectly competitivecircumstances, price is the only factor which the producer has toforecast. In monopolistic circumstances, it is rather the " demand"than the "price" with which he is concerned, since the price is not insuch case independent of the action of the producer.