Prosperity and Depression.pdf

374 Nature and Causes of the Cycle PartBIt goes without saying that the monopolistic restriction of thesupply of factors of production other than labour, and the raisingof prices other than wages, have the same effect of slowing-downgeneral expansion.Drop ininvestmentbecause ofinsufficientdemand.So far we have discussed the case where theexpansion is allowed to develop up to the limitset by the amount ·and distribution and willingnessto work of the available means of production, orwhere the expansion comes to a halt because of aninsufficiency of the money supply. We have seenthat it is very likely that serious maladjustmentswill make their appearance when the general expansion comes to astandstill for the reasons indicated, or even when it slows downto a certain extent.We have now to enquire whether there is not a strong probabilitythat the expansion will be interrupted at an earlier stage for thereason that it generates a type of maladjustment other than thatwhich we have discussed, before it reaches the limits in question.The type of maladj ustment which we have in mind is an insufficientdemand either for consumers' goods in general, or for certaintypes of them, or for certain types of capital goods. It is thattype of maladjustment which Professor ROBERTSON ascribes to thetemporary " gluttability of wants", or which Professor PIGOU hasin mindwhen he says that the optimistic forecasts which have beenmade during the boom, and have materialised irlheavy investmentsin different lines of industry, are brought "to the test offacts "-ana, by that test, are found wanting-after the close ofthegestation period for a number ofthings the production of whichwas started during the upswing. A maladjustment of this sort isalso what Professor SCHUMPETER has in mind in his explanationof the collapse of the boom.The idea is that the investment activity which takes place duringthe upswing is to a large extent concentrated in particular lines ofindustry-railway construction, automobile production, electricalmachinery, etc. Then comes a day when the investment opportunitiesin these fields are exhausted; the want-or, rather thedemand-is satisfied. Investment in these lines must come toan end. There is no guarantee at all that replacement demand will