Prosperity and Depression.pdf

160 Nature and Causes of the CyclePart IIprosperity and depression are. sufficiently precisely defined interms of one or the other or all three of these magnitudes.] .In ,recent years, unemployment has frequentlycc Employ- been taken as the sole criterion of the economicment" situation of a country.. It ,must not be forgottencriterion. in this connection that a certain amount of unem-·ployment is always present (frictional unemployment),and that there is a seasonal fluctuation of employment inmany' trades and countries. Even if these two factors are' disregarded,the fact remains that in some countries unemploymentremains on a high level over long periods--e.g., in England orAustria after the war. In such a case, we speak of a chronicdepression: but this does not mean that cyclical fluctuations areabsent. They are merely superimposed onthe mass of ustru~ral"unemployment.Even with all these qualifications-which are equally applicableincidentally to the two other factors of real income consumed andreal income produced-the employment index cannot be regarded.as an unfailing criterion in all cases. In agricultural countries,for example, depressions, whether, due to crop failures.or to1 The precise definition of the three variables-real income consumed,real income produced and rateofemployment-and the method of measuringthem open up, of course, the possibility of infinite discussion and raisea host of intricate problems. The whole literature on the constructionof index":numbers of the price-level and' volume of production and thecognate problems which' they raise, has its relevance in this connection.It need not, fortunately, detain us at this point, since (as we shall see)the fluctuations with which we are concerned are so marked as to bevisible, whichever of the current definitions and methods of measurementof the fundamental magnitudes is adopted. ExceptioJ;lal cases areconceivable where reference to other criteria is indicated-for example,where adverse influences on the real income consumed or the real incomeproduced are offset by harder work. In such a case, 'though the realincome consumed. and real income produced are unchanged, we arecompelled to record a deterioration of the position, because the economicwelfare is reduced.' The additional criterion which must be introducedin this case is the length of the working-day. An alternative would beto define real income in such a way as to cover the quantum of leisureachieved and to make allowance in $ome manner for the toil and troubleinvolved. The statistics, however, afford no ground for supposing thatsuch exceptional cases are of any considerable practical importance.Hence we tnay refrain from going into the matter in greater detail.