Prosperity and Depression.pdf

Chap. 7 161It is important to consider the effect of crop fluc­G. Effects tuations on investment both because of the initialon effect on the activity ofinvestment-goods industriesilll1Utllll1lt. and because of the indirect effect on monetaryexpansion or contraction in subsequent periods.Roughly speaking, the following may be expected to be theeffects of a good harvest, for which the demand in money termsis inelastic:(a) A fall in investment by agricultural producers;(b) A rise in investment by industries transporting andutilising the crop;(G) A rise in investment by consumers' goods industriesnot utilising agricultut;a1 materials, particularly those notserving the agricultural population;(tl) A change in the amount of/ investment in holdingstocks of agricultural produce. This aspect has recentlybeen stressed by Mr. KEYNEs. 1 A distinction must be madebetween the initial effect occurring immediately after theharvest (which will probably be a fall in the value, as distinctfrom the physical quantity, of stocks held as compared witha normal year) and the subsequent effect (which may be anincrease in the value of the carry-over).Strictly speaking, these movements refer less to investmentsthan to the " tendency to invest", or the demand for investmentfunds. To what extent this demand will be satisfied, and the tendencyto invest take the shape ofactual investment, depends on theelasticity of the supply ofinvestible funds in ftte various countriesconcemed. It is not impossible, for example, that a violentredistribution of incomes between agriculturists and others,accompanied by a flow ofmoney from agricultural to non-agriculturalcountries, or viGe versa, might ultimately result in a deflationaryshock to the credit system, which would tend to neutralise anyinaeased demand for investible funds that might be simultaneouslyengendered.ITlu General Theory 01 EmpIO)'tnent, Interest and MOn8Y, pages 32getseq.