Prosperity and Depression.pdf

Chap. 8Recent Discussions on the Trade CycleSimilarly, other cases of differences between ex ante saving andex ante investment can be analysed. "When the State financespublic works with the printing ofnew notes, the increased investmentis matched [ex post] by increased' real' savings ", althoughex aftle investments were in excess of savings, since it is assumedthat no planned savings corresponded to the planned Governmentinvestment. "At the end of the period, some people hold, morecash than at its beginning. This is evidence that they had anincome which they have not consumed-i.e., that they have saved.Ex post, there is ex definitione equality between savings andinvestment." 1In a later article, 2 Professor OHLINa has givenThe ex ante important elucidations ofhis theories. He explainsconcepts as there that his ex ante concepts ofsavings, investmentschedules. as well as the other closely related pair of concepts-viz., demand and. supply of credit-are intendedto mean the same thing as demand and supply schedules. "Exante saving " means the schedule showing how much people arewilling to save at different hypothetical rates of interest. And" ex ante investment " is the schedule showing how much peopleare planning to invest at different interest rates.However, the rate of interest is not determinedDemand and by the interaction of the curves relating to savingsupplY of and investment; it cannot be explained by demandcredit and supply of saving. "There is no such marketdetermine for savings and no price of savings" (page 4 24).the rate But there is a market for credit,' and" the price ofof interest. credit [i.e., the interest rate] is determined by thesupply and demand curves for credit or, whichamounts to the same, for' claims' " (pages 42 3 and 424).capital-goods industries, as analysed by Professor Hayek. Thatshowsagain that Professor Hayek's theory can be well expressed with the helpof the Swedish terminological apparatus.1 Ohlin, loe. cit., page 69.I " Alternative Theories of the Rate of Interest ". Economic Journal,Vol. 47, 1937, page 423 et seq.a It is not quite clear whether his Swedish colleagues all agree on this.• Strictly speaking. there are different markets for different landsof credit--short-term, long-term, etc.