Prosperity and Depression.pdf

Chap. 1 PreliJl/inary RIll/arks 7Ie causally relevant" one. The other factors are neglected, or itis assumed that they· do not change or cannot be changed, or thatit is for some reason not desirable to change or eliminate them (e.g.,inventions) or that their changes cannot be further explained (atleast not by the economist) and dlat they must therefore be taken forgranted. In particular, monetary and non-monetary explanationsofthe business cycle seem to be frequendy reconcilable. The nonmonetarytheorist (who stresses, e.g., the impact of inventions,or changes in demand with intensified changes in deriveddemand) often tacitly asswnes-or ought logically to assumethewillingness and ability of the banking system to expandcredit on existing terms, whereas the nlonetary theorist takes suchdisturbing events as inventions or changes in demand for grantedand blames the monetary authorities for not adjusting the termsof credit.These considerations suggest that it is usefulClassification to distinguish certain types of causal factors.of callJa/ One may draw a djstinction, for instance.factors. between active and passive factors or, in otherwords, between causes and conditions or· betweenconditions per quam and conditions si", fJlIa non. Inventions, crop ~changes, changes in demand are active factor$, while institutionalcircumstances such as are mentioned above should be classifiedas passive conditions. Sometimes this distinction may be useful;but frequendy it is difficult or impossible to draw a sharp linebetween the two types of factors. How is. it possible to decidewhether any given action on the part ofthe banks, such as loweringthe discount rate when reserves are running high or failure toraise the rate when the demand for credit rises (i.e., when thecc natural rate" has risen), is an " active" or a " passive" factor?This is· obviously a terminological question and it is fruitless topress for an answer in every single case.The real distinction--in some cases-is between tOlltro//ab"and NlU'ofJfrollabJe factors. 1 The weather, e.g., is uncontrollable,while institutional factors are at least in theory controllable.1 Ct. J. M. Clark, St,.at8,ie Factors in· Business Cycles, New York.1935, pages 4-5 and passim.