Prosperity and Depression.pdf

Chap. 7AgriclJlture and the Business Cycle§ 3. INFLUENCE OF THE BUSINESS CYCLE ON AGRICULTUREAs each part of the economic system is to someInelasticity degree sensitive to developments in all other parts,oj farm industrial fluctuations are bound to exercise a ceroutput.tain influence on agriculture. This influence operatesthrough the demand for, and price of, agriculturalproduce on the incomes· of the agricultural classes. If therewas a fairly immediate and substantial reaction on the part ofagricultural output to the nlovements in monetary demand, therewould be no reason why the trade cycle should be regarded as aprimarily industrial phenomenon. In fact, however, agriculturaloutput is, on the whole, so unresponsive to money incentives thatthe trade cycle is often regarded as confined (so far as productionis concerned) to industry, and in particular to that branch ofindustry which is not s:upplied with its raw materials by agriculture-namely, the production of durable and investment goods. Itis not, however, altogether·impossible that industrial fluctuationsmay influence agricultural output in the long run, though onlyafter a period so long that the words " response " or " elasticityof supply" cease to have much meaning. The" responses" insuch case will have the same effect as spontaneous variations inoutput. On the other hand, industrial fluctuations will affectboth the demand for agricultural products and-to a lesser degree-their cost of production.Many writers, including L. H. BEAN, l ].M. CLARK,­Effe~t on A. HANSEN8 and ]. H. KIRK,' recognise the impordemand.tant influence exercised on agricultural incomes byfluctuations in industrial activity accompanied bysimilar fluctuations in money demand in general. There is a1 E.g., "Post-War Interrelations between Agriculture and Businessitt the United States," U.S. Department of Agriculture, Bureau 01 A griculiuralEconomics 1.9. EC.752.Pa.I Strategic Factors in the Business Cycle.S II The Business Cycle in its Relation to Agriculture" in Jouynal ofFa'Ym Economics, 14 : 59-68, 1932.4 Agricultu'Ye and the Trade Cycle, Part I.