Prosperity and Depression.pdf

Ana[ysis of TheoriesPart Iincome". This conclusion is fortified by the fact (stressed byDr. LUTZ) that an excess of investment over saving has the sameconsequences in Professor OHLIN'S scheme as in ProfessorROBERTSON'S : in both cases, it has a stimulating effect and isa. characteristic of an expansion of business (prosperity phase ofthe cycle).If the foregoing interpretation of Professor OHLIN'S theory iscorrect-that is to say, ifit does not exceed what can be deducedflom his theory) although it contains more than he explicitly saysthereremain certain inconsistencies and difficulties which call forfurther modifications of the theory. 1In so far and inasmuch as the actions of theHow can individuals are determined by, and foreshadowedalternative in, the various schedules, everything happenspurchase and according to a plan-viz., to that one of the" altersale·plans be native plans" of the various individuals whichdisappointed? corresponds to the interest rate emerging as theactual market rate. Since Professor OHLIN identifiedthe ex ante magnitudes with the alternative plans embodied in,or represented by, these schedules, it is difficult to see how he canspeak of people's being disappointed by events going contra.ry totheir plans. Itis said, for instance, thatretailers may find themselveswith greater stocks than they expected (unintentional investment); orwith lower receipts than they anticipated (unintentional dissaving).Are their actions leading to these results-viz., either leaving thesale price unchanged (which entails the accumulation of stocks) orreducing the price (which entails losses and a reduction in saving)­not predetermined in their supply schedule? Everything happensaccording to the various schedules, and if all the possible plans ofwhich Professor OHLIN speaks are embodied in these schedules,there can be no upsetting of the plans and no disappointment.There are various ways out of this dilemma. The best, whichrescues a maximum of Professor OHLIN'S theoretical edifice1 Tnese difficulties have been clearly noticed by W. Fellner, " Savings,Investment, and the Problem of Neutral Money", in Review of EconomicStatistics, Vol. 20, November 1938, page 188. Ct. also the criticism ofthe ex aflte concept by Professor H. Neisser in Studies in [ftcome andWealth, vol. II, New York, 1938, page 172 et seq.