Prosperity and Depression.pdf

10 AM/ysis of TlNori,s Part IThe interaction ofexogenous and endogenous forces is intricate,and the logical possibilities of their mutual impacts are numerous.We shall not, however, discuss these problems in the abstract hereat the beginning. They will find their solution as we proceed inour theoretical enquiry, especially in Part II of the present report.One methodological rule of thumb may beInhlrmt suggested-at this .point, however, although it willills/ability find its full justification only later. For variousill thl IGDfJo11lk reasons,itseems desirable, in the explanation of the.[1.111111. business cycle, to attach as little importance aspossible to the inBuence -of external disturbances.In the first place, large swings in the direction of prosperity anddepression as we find them in real life are difficult to explainsolely by exogenous forces; and this- difficulty becomes an impossibilitywhen _the alleged U disturbances " do not themselvesshow a wavelike moveme~t. Even if a periodic character isassumed (I.g., in the- ase of crops or inventions), the hypothesisis full of difficulty. The responses of the business system seemprima faae more important in shaping the business cycle than.external shocks. Secondly, historical experience seems to demonstratethat the cyclical movement has a strong tendency to persist,even where there are no outstanding extraneous influences atwork which can plausibly be held responsible.!- This suggeststhat there is an inherent instability in our economic system, atendency to move in one direction or the other. If it is possible(as we believe) to demonstrate that such a tendency exists and toindicate the conditions under which it works, it will be comparativelyeasy to fit all kinds of external perturbations; including allState interventions, into the scheme. Exogenous forces will thenfigure as the originators or disturbers of endogenous processes,with power to accelerate, retard, interrupt or reverse the endogenousmovement of the economic system.' .1 What is to beregarded as " outstanding" and If plausible" is, ofcourse,a matter of dispute. As there is always something happening somewhere,it is always poss~ble to find some external events which can be made thebasis of a tentative explanation.• For this reason, anything like perfect regularity in respect of theamplitude, length, intensity and concomitant symptoms of the cyclicalmovement is II priori improbable.