Prosperity and Depression.pdf

394 Nature and Causes of the 0c1e Part IItime-consuming processes ofproduction. The reason is rather thefear that prices will fall and a lack of confidence, a feeling ofuncertainty about the future in general. It follows that, whentotal demand and prices have once settled down at some levelor other, the demand for investible funds will rise automaticallywith the mere lapse of time. The fear that prices will fall furtherwill gradually disappear and certain investments, which wouldhave been possible and profitable but have not been undertakenbecause of the fear that demand and prices would fall further, willbegin to be made.It is very likely that during the contraction, when investment wasat a standstill, new inventions may have been made which, inspite of the fact that (at the ruling prices) they would reduce thecost ofproduction,1 have not been put into application because theynecessitate more or less heavy investments which the entrepreneuris not willing to make when he expects a fall in demand and prices.Thus a stock ofinvestment opportunities is accumulated, which islikely to induce investment expenditure as soon as the generalprice fall has been stopped. The way in which, after a long spellof depression, the ice is broken by some enterprising spirits whohave the courage to try something new in some line ofproduction,and the way in which the example they set is followed by others inthe same or other branches of industry, are described in classicallanguage in the various writings of Professor SCHUMPETER.cc Whenever . • . new things have been successfully done bysome, others can, on the one ~and, copy their behaviour in thesame line . • • and, on the other hand, get the courage to dosimilar things in other lines, the spell being broken, and manydetails ofthe behaviour ofthe first leaders being applicable outsidetheir own field of action." I1 See Mitchell lBusiness Cycles, Berkeley. 1913, page 567.• Schumpeter, Economica, December 1927, page 298. See also hisTheory of Economic Development (English translation, 1934) and Pigou,Indust,-ial Fluctuations, 2nd edition, 1929, pages 92 and 93. It should,however, be noted that Schumpeter uses this argument, not so muchto explain how the lower turning-point is brought about, but to show howthe system is carried, during the upswing, beyond the equilibrium point(colupare footnote on page 81 above). However, there seems to be noreason why this dynamic factor should not in some cases make its appearanceat an earlier point in the course of the cycle.