Prosperity and Depression.pdf

Chap. 8R.e&lIIt DisaunOlU 011 the TraJe c;,chprices, costs and profits via the state of expe~tlon with presentproduction, consumption and investment. 1Mr•. KBYNBS has, of course, much to· say on the formation ofexpectations and the difficulties and limitations confrontingany theory on this subject. But all this is contained in the wealthof remarks, observations and obi/e,. .Ji&'/a which-ela.bomting,supporting, illustrating and, at times, contradicting and blurringsurroundthe main outline ofhis theory : the dynamic aspects donot·penetrate the heart of his theory.Professor ROBERTSON'S" period analysis ", on the other hand.is a clear step in the right direction of a truly dynamic analysis,Simila.tly, a number of Swedish writers, especially Dr. EricLUNDBERG in his Stlldies in the Theory of EcOllOmi, ExpfJfUi(J1J,2have visualised the problem clearly. Dr. LUNDBERG characterisesthe method as cc sequence analysis " and has constructed a numberofmacroscopic dynamic models-"modelsequences" as hecalls them.aDr. LUNDBERG'S models are theoretical-thatTheoretical is to say, the figures are assumed (not found statistiflerSllScally); the relationships postulated,although asswnedstatisJi&al and selected so as to be not impossible on a primmodels. . grounds, are too simple and too few in number toI From a strictly logical point of view, the psychological link betweenthepast and thepresent consisting of expectations maybe dropped and thetheory stated in terms of a direct relationship ~tween observable phenomenaat different points of time. Psychologically.it may, however, beuseful to retain the word" expectations ", or a similar concept, as a link,because it reminds us· of the fact that those dynamic U laws " (relationships)are nothing buthypotheses; thatthey can hardlyeverbe stated veryprecisely in great detail; and that they may always be subject to rapidchange " without notice ".I London, 1937, especially Chapter IX.I Compare the following remarks from his book : U The introductionof causal elements li.nk:it).g up economic factors in successive periods oftime means a more radical departure from equilibrium-theories than thedynamisation claimed byMyrdal, and laterbyKeynes, when paying attentionto the independent r61e of expectations and anticipations. • • .The introduction of expectations can, in a way, be said to mark thestepping-stone to dynamic analysis, because they express the connectionlinking present plans and activities with future events. However,economists·have indulged in too much purely formal exercise with thisterm. • . • It ·is sensible to link actions withexpectations, onlyifthelattercan beexplained on the basis of past and present economic events.