Monetary Policies and Full Employment

By William Fellner | Go to book overview

CHAPTER IV
Generalized Expansion

SURPRODUCTION GÉNÉRALISÉE AND ITS LOGICAL COUNTERPART

THE FOLLOWING pages present a hypothesis concerning factors contributing to a high inducement to invest in extended periods of economic expansion. It is recognized, of course, that any one hypothesis can at best claim to be taken into account in conjunction with many others when an interpretation of economic reality is attempted.

In business cycle theory it has been frequently maintained that the phenomenon appearing as general overproduction should be interpreted as surproduction généralisée rather than générale.1 Essentially this view represents an attempt to reconcile facts with Say's law: There exists no such thing as general overproduction, but partial overproduction may become "generalized" by giving rise to processes temporarily conveying the impression of general overproduction. Assume that there exists partial overproduction of Commodity A, and that this, in accordance with Say's law, is tantamount to partial underproduction of Commodity B. Resources should now be shifted from Section A to Section B of the economy. This takes time, however, and consequently production and employment as a whole will be curtailed for a period that should not be long, if the initiating causes themselves determined the entire

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1
For the literature on this topic, cf. the references to be found in Albert Aftalion, Des Crises Périodiques de Surproduction ( Paris, Marcel Rivière, 1913), Vol. I, Book IV, chap. i; see also Jean Lescures, Des Crises Générales et Périodiques de Surproduction ([ 1st ed., 1906], 4th ed.; Paris, Donat-Montchrestien, 1932), pp. 488-492. Of the advocates of the doctrine listed by Professor Aftalion, Tugan-Baranowsky is the earliest. Cf. Michael von Tugan-Baranowsky, Studien zur Theorie und Geschichte der Handelskrisen in England ( Jena, Gustav Fischer, 1901), pp. 10-12, and Part I, chap. viii. Tugan- Baranowsky pointed out (op. cit., p. 250), that his theory had appeared in 1894 in the first Russian edition of his book. As will be seen presently, the theory is implicit in numerous cycle theories.

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