Prosperity and Depression.pdf

16z AnalYsis of Theories Part IBefore any conclusions can be drawn as to theH. Effects further consequences of crop fluctuations on theon saving. industrial economy by way of cumulative monetaryexpansion or contraction, the effects on investmentmust be compared with the effects on saving. An excess ofinvestment over saving would generate an expansion, while anexcess of saving over investment would cause a contraction.Mr. J. I-I. KIRK 1 bases his conclusions as to the deflationaryeffects of big harvests on the tendency of consumers to save apart of the extra purchasing power accruing to them throughthe fall in agricultural prices. Obviously, no conclusion as tothe net effect can be drawn a priori: but, in any concrete case,the attempt must be made to strike a balance between all thetendencies towards changes in investment and all the tendenciestowards changes in saving. As was pointed out, tendenciestowards increased investm,ent, in conjunction with an elasticcredit-supply, engender monetary expansion, while tendenciestowards increased saving, if unaccompanied by increasedinvestment, engender monetary contraction.We may now pass from the analysis of the effects1. Inter- of fluctuations in the total crop of a self-sufficingnational economy on the industrial activity of that economyaspects. as a whole to an examination of the effects offluctuations in the crop of a geographical subdivisionof the total economy (a district or country) on the industrialactivity of that subdivision.The elasticity of demand for the crops of a single country (interms of international money) is of course much greater than thatfor the crops ofthe world as a whole: and the smaller the country,and. the more perfect the world market for the crops, the greaterthe elasticity of the demand. It is greater, for example, in thecase of New Zealand than in the case of the United States ofAmerica, and greater in the case of wheat than in the case of mostanimal products. Thus, in many or most cases, an increase inthe crop of one country, unaccompanied by any change in thecrops of other countries, \vill result in an increase in the money1 A gricultufe and the Trade Cycle, London. 1933.