Prosperity and Depression.pdf

Chap. 10The Expansion Processfuture. The fact that capitalistic production utilises durableinstruments means that services or goods ofa given sort currentlyproduced are in joint supply with services or goods of the samesort at various future dates. Thus, if demand is expected to riseover a certain future period, the supply will be provided in a lumpat the beginning and (as it were) stored up in the shape of stocksand durable instruments.Since consumers' .demand can be profoundlyR4perCIIJsions affected by changes in capital construction, it ison demand illegitimate to presuppose a cyclical fluctuation offor finished consumers' demand, and then to use the accelerationgoods. principle to explain the larger fluctuations in theproduction ofcapital goods.The principle therefore-quite apart from the necessary qualificationspreviously discussed-must be given its proper place withinthe framework ofa more elaborate theory ofinvestment, in connectionwith which it expresses the one-way causal relationshipfrom the demand fOf consumers' goods to the production ofproducers' goods. The volume of production of producers'goods (which, in order to avoid double reckoning, should bemeasured as the sum ofthe value added to the product in successivestages) is. equal to·· the sum of new investment and replacementor reinvestment. As has already been pointed out, it may beconvenient to speak of " total " or " gross " .in-yestment in distinctionto cc new" or "net " investment (which may also benegative). Gross investment is then another way of sayingproduction of producers' goods plus changes in the stock ofconsumables.As we have seen, it is very difficult to give an exact definitionof new investment for the economy as a whole, since it involvesdefining what is meant by maintaining the capital stock of societyintact. It is still more difficult to measure it statistically-that is,to distinguish during a given period between replacement ofwom-out capital and additions to the capital ~tock. Fortunatelywe do not need for many purposes to make the distinction. Itsuffices to speak ofproduction ofproducers' goods. But, roughlyspeaking, the fact that production of producers' goods fluctuatesmore violently than the production of consumers' goods-which