Prosperity and Depression.pdf

Chap. 7Agriculture and the Business Cycle(through all the different channels) of fluctuations in agriculturaloutput relates, therefore, in the first instance (sections Ato H) to a self-sufficient economic system. In section I, the positionis considered from the standpoint of the external trade relationsof an individual country.Professors PIGOU and ROBERTSON link up harvestA. "Real" variations and industrial fluctuations by argumentselasticity appropriate to .an economic system without atheories. common medium ofexchange (i.e., abarter economy),and then proceed to take account of the modificationsintroduced into the relationship by the fact that economicincentives present themselves in a money form.The successive steps of the argument, as culled from variouschapters of Professor PIGOU'S Industrial Fluctuations and his Theoryof Unemplqyment, seem to be as follows.An exceptionally good harvest leads to a larger demand on thepart of agriculturists in terms of agricultural produce for theproducts of industry.1In so far as this raises the real income of the community, it willlead to an increase in the supply of new capital from savings, adownward tendency in interest rates and an increase .in the demandfor labour in terms ofwage-goods. 2In so far as it involves an increase in the employers' expectationsof the yield of labour in terms of goods in general, the rise in theagricultural demand for industrial products will increase theemployers' demand for capital and pro tanto-whether the demandis satisfied out of stocks or savings-the demand for labour interms of wage-goods. 8 Whether the big harvest will in factincrease the employers' expectations of the " real" yield of labourdepends, according to Professor PIGOU, on the "elasticity· of thegeneral demand for agricultural produce ". He writes : "If thegeneral demand for agricultural produce is highly inelastic-i.e..,has an elasticity less than unity-theenlarged amount ofagriculturalproduce obtainable" for a unit of industrial output represents,1 Industrial Fluctuations, 2nd ed., Chapter IV,page 41.I lbid.# Chapter'III, page 20.• I bid., Chapters III and XI.