Prosperity and Depression.pdf

Chap. 3 The Over-jf/Pestment Theories 53a continuous increase in the volume of production. For reasonswhich will be expounded in the subsequent pages, it seems, however,that the undertaking to prove this latter point rigorouslyhas not been made good.In his Prices and Production,! Professor HAYEKNei./se,.'.s argues that, even where the extension of /thecriticism. structure of production which entrepreneurs wereinduced to undertake by the artificial cheapeningof credit is completed, the old arrangement tends to be restoredlater on for the reason that consumers will "attempt to expandconsumption to the usual proportion "2 and "the money streamwill be re-distributed between consumptive and productiveuses" 3 in the same, or nearly the same, proportion as it wasdistributed before'such proportion was artIficially distorted fromthe normal by the injection ofmoney.. But, as Professor NEISSER 4 has shown, there is no reason to expectthis return to the old arrangement,ifthe new roundabout methodsof production have been brought to completion. When theyare completed, the flow ofconsumers' goods which was temporarilyreduced will rise again, and will even reach a higher level than thatfrom which the expansion started, so that consumers can safelyexpand their consumption. Forced saving will cease to benecessary when the new processes of production are completed.When they are completed, all that is required to maintain themis that the entrepreneurs-not the consumers-should refrainfrom "disinvestments ", that is, from consuming capital orfrom spending amortisation quotas on consumption. There isno reason why the old proportion, between money spent forconsumers' and for producers' goods should be restored. It isnot true that the whole of newly injected money becomes incomeeIther at once or after a while. Part of it must be retained bythe entrepreneurs in order to pay for intermediate goods (in1 2nd ed., pages 55 et seq.I Ibid., page 57.• Ibid., page 58.I "Monetary Expansion and the Structure of Production" in So&ialResearch, Vol. I, New York, November J934. pages 434 et seq. Similarobjections had been raised by Piero Sraffa, Economic Journal, March 1932.