Prosperity and Depression.pdf

Chap. 10The Expansion Process'(for hoarding purposes)-we prefer to deduct from the supplycurve instead of adding it to the demand curve. 1. But the readercan easily make the slight adjustment, if he prefers ProfessorOHLIN'S scheme.It may furthermore be observed that we need not dxclude shorttime-lags between the floating ofa loan in the market for investiblefunds and the actual expenditure for the purchase of material,equipment, labour, etc., of the money raised.2.There is another point to be cleared up. Do we" Net" count as investment only" net" (or" new") investinvestmentment or " total " (or " gross ") investment? Theand" gross '.f difference between the two is reinvestment orinvestment. replacement requirement. Gross investment = netinvestment + reinvestment. Gross investment isroughly the same as production of producers' goods, the onlydifference being production of consumers' goods which are notconsumed) but stored up in the shape of stocks, or of durableconsumers' goods (motor-cars, houses) : but.the latter are betterrtrgarded as producers' goods producing consumable services. Ifwe define investment as net investment, we must consider thepossibility of its becoming .negative (although this contingencywill not arise so long as we deal with the expansion process).If, namely, gross investment does not cover replacement requirements,the difference between the two is negative investment:disinvestment, capital consumption. Since we are concerned withwhat actually happens in the market and "negative demand"for investible funds is a difficult concept, we had better refrainat this point from using the concept "negative investment".1 Hence our demand· for investible funds is more nearly equivalent toMr. Keynes' schedule of marginal efficiency of capital than ProfessorOhlin's demand for credit.I That would seem to be the most" natural" use of the terms, that is,the one which follows most closely their everyday meaning. But thereare alternative constructions (terminologies) available and it should benoted that the one proposed in the text implies that a current excess ofsatisfied demand for investible funds-in short, of investment-oversaving (see below) will lead to an increasing income only with a shorttime-big. Hence there is a slight deviation from Professor Robertson'sdefinitions.