Prosperity and Depression.pdf

CHAPTER 1PRELIMINARY REMARKS§ I. THE EXPLANATION OF THE BUSINESS CYCLEBefore we begin the exposition of the various theories ofthe business cycle, some remarks may be advisable on thegeneral logical nature of any explanation of the· cycle, and on themutual relation between various possible explanations (theories).The implications of these observations will be fully realised onlyin the light of subsequent pages where these formal principles are,so to speak, put to work. Nevertheless, it seems useful to touchupon these things at the beginning in order to avoid misunderstandings.The study of the various theories will be more fruitfulif the following general remarks are kept in mind.Such a complex phenomenon as the businessPlurality cycle, which embraces almost all parts of theof causes. economic system, does not easily lend itself toexplanation by anyone factor. Even ifwe assumefrom the beginning that the same explanation of the businesscycle holds good in the highly industrialised countries of WesternEurope and America as well as in industrially less developedcountries such as New Zealand.or Roumania, and in the twentiethcentury as well as at the beginning of the nineteenth-neither·ofwhich assumptions is by any means self-evident-it is not easyto speak of the cause of the business cycle. Few writers haveventured to proclaim just one single factor as the cause of thebusiness cycle or ofdepression in particular. In fact, explanationswhich run in terms of one single cause have been more and morediscredited and should be regarded with suspicion. The majorityof modern writers on the subject are careful to point out that awhole set offactors, and perhaps not always the same combination