Prosperity and Depression.pdf

Chap. II The TIIrfliflg-poiflts 347sooner orlater of old age: but it is none the less true-a~d deservingof attention-that many die earlier because they catch aninfection or are victims of an accident.The importance of this consideration lies in·the fact that (as hasalready been indicated and will be shown in detail) an expansionbecomes more sensitive to accidental disturbances~ after it hasreached a certain stage, and similarly a contraction can be moreeasily stopped and reversed. by some stimulating factor, after ithas progressed for some time. Therefore, even if we were notin a position to prove rigorously that expansion generates contractionand contraction generates expansion, a fairly regular successionof peri~ds ofprosperity and depression, ofexpansion and contraction,might be explained by accidental shocks distributed in arandom fasWort over time.A.The Down-turn : Crisis§ 2.. THE METHOD OF PROCEDUREIt has already been pointed out, by way ofillus­Three stages tration, that a deliberate·policy of deflation, pursuedof' the for whatever reason by the monetary authorities,argument. or the interruption of an ambitious constructionscheme may start a process of contraction. Weshall now consider how this works out in detail and what otherevents or factors must be held in mind. As a. first step (§ 3),we shall suppose that sU:ch disturbances occur, and. enquire howthey exert their depressing influence and, in particular, how anexpansion may be interrupted and a general contraction be startedby a factor which directly affects only a more or less restricted partof the economic system. At first we assume such disturbancesto occur independently of the cycle. That is to say, they mayarise in any phase ofthe cycle, during the contraction phase just aswell as during the expansion. If they occur when a generalcontraction is going on, the contraction will be intensified. Ifthey occur during a general expansion, the expansion' may beslowed' down or) if the shock is violent enough, cut short.