Prosperity and Depression.pdf

AnalYsis of TheoriesPart IInvestme~t opportunities are said to have becomeThe drying-up scarcer, as compared with the nineteenth century,of ifJtJeslmenf because of the less rapid· growth of population;opportunities. the cessation of migration on a large scale and ofthe opening of new territories and continents; thereduction of international1ending for the reason just mentionedand others of an institutional and political character. Moreprecarious assumptions are also made-for instance, that capitalconsumingtechnical inventions are less likely to be made in thefuture than in the past.On the other hand,reasons are given which make ·it unlikelythat. the volume of saving will decrease, and it is stressed thatimportant changes in the structure of the supply of saving haveoccurred which impede their smooth absorption into the availableinvestment channels: savings are increasingly made by institutionssuch as life insurance and social insurance companies, which are,in most countries, prevented from investing in equities. Inother words, capital has become less venturesome, more timidthan ·it used to· be in the .heydays of capitalism. This tendencycreates·a situation of scarcity amidst plenty in the capital marketand .eliminates a number of important outlets for investment.These speculations· about secular tendencies and developmentsare necessarily vague and are easily coloured by the subjectiveattitude of the particular writer and the surrounding conditions.Their persuasiveness often depends less op. the logical force of theargument than on the way in which relevant facts are selected.Temporary hitches in the flow of investment, due to psychologicalshocks, ... rigidities, etc., are frequently interpreted as being dueto a chronic lack of investment opportunities. The conditionsnecessary for· chronic unemployment are overlooked or notclearly .stated: for example, it is often not realised that eithermoney-wages and prices must be rigid against downward pressures,or else, if they are allowed to fall gradually under the pressure ofcompetition, it must be assumed that people are willing to hoardunlimited amounts of money.However, the clear realisation of all the necessary qualificationsof these· theories cannot definitely disprove their validity, althoughit may reduce their persuasiveness. Only the careful scrutiny of