Prosperity and Depression.pdf

Chap. I Preliminary Remarle.s IIA frequently used analogy may be adduced, notMechanical to prove anything, but to make the meaning ofanalogy. what has been 'said clearer. We can compare theeconomic system with a pendulum or with a rockingchair.A rocking-chair may be made to perform fairly regularswings by quite irregular impulses (shocks) from the outside.(Besides it may conceivably have a mechanism ~stalled whichmakes it swing without outside forces operating on it.) In theexplanation ofthe movement ofthe chair we must now distinguishtwo factors : the structure of the chair and the impulses from theoutside-endogenous and exogenous factors. The structureof the chair is responsible for the fact that irregular shocks aretransformed into fairly regular swings. An ordinary chair wouldordinarily respond quite differently, although some particularkinds of impulses are thinkable (regular pushes and pulls) whichwould make it move in regular swings.Naturally, the structure of the rocking-chair-and hence thenature of the swings produced by external sh&cks-may be verydifferent in detail. The system might be so constructed thatincessant regular swings are produced if, after having been pushed,the system is left to itself. Or else the swings may graduallydisappear-that would be the case with an ordinary rockingchair;we speak in that case of " damped oscillations " and maydistinguish various degrees of dampening. The opposite may betrue, the swings may become more and more violent; the fluctuationsare then said to be " explosive " or cc antidamped ") or thesystem is in an unstable equilibrium.The methodological suggestion made above then comes tothis. We tentatively assumethat, for the explanation of the fairlyregular s;Wings ofthe economic system (just as for those, ofthe rocking-chair),itismore important tostudythepeculiar structureof thesystem and hence its responses to outside shocks than to look forregularities in the occurrence ofthese shocks. This hypothesis is,ofcourse, subject to subsequent confirmation or rejection.If,· therefore, in many of the following sections, not much issaid about such external influences (and in particular about thevarious forms of intervention in the economic process' by theState or other public bodies, which. figure so prominently in the