(3) Because of variations in the intensity of the desire for the fixed instruments of production and transport—buildings, ma chinery, railways, ships, etc. These instruments are large and expensive; they take a long time to construct, but once a batch of them is constructed, it will serve to satisfy the increased needs of the community for many years. Investment in such instru ments is therefore discontinuous, and their rate of output espe cially variable ; and variations in the prosperity of the trades making them react severely on other trades. The rate of invest ment in instruments depends a good deal on the progress of technical invention, and it is tempting to connect a good many of the booms of the last century with inventions, e.g., that in Eng land in 1847 with railway-building, that of 1900 (especially in Germany) with electric transport, etc.
Instability Resulting from Organization of Industry.— We come finally to certain legal and social features of modern in dustry which may be held to promote instability of prices and output.
(1) There is first the fact of competition, which aggravates miscalculation, since individual producers do not gauge correctly the share of an increased market which will fall to their own lot, nor the effect which their rivals' action will have in driving up their own costs of production. It might be hoped, therefore, that the progress of the movement toward the formation of "trusts" and combines would damp down the violence of the trade cycle; but so far it is difficult to be sure that this hope has been ful filled, partly because it is not always in the interest of combina tions to promote stability, and partly because they are apt to interpret stability as stability of prices, which is not always con sistent with stability of output and employment.
(2) There is secondly the wage-system, which may lead to a real disharmony between the interests of the employing class, which dictate the course of production, and those of society as a whole. For generally speaking the employer has more interest in intensifying production during a boom and curtailing it during a depression than the workman, who suffers during the boom from speeding-up and during the depression from unemployment.
(3) Finally, there is the unequal distribution of wealth, which in the view of many writers leads to a chronic tendency to "over saving," manifesting itself during the boom in the construction of more instruments than will be able ultimately to find remuner ative employment, and during the depression in, among other things, a piling up of idle bank-balances. The remedy proposed is to increase the purchasing power of the wage-earner, whose de sire for necessaries and comforts is held to be steadier and more elastic than the desire of the rich for luxuries.
It remains to add that much work has been done in recent years, especially in America, in compiling statistical data con cerning the trade cycle, and attempting to forecast its course. The more accurate the forecasts can be made, and the more widely business men act upon them, the greater will be the extent to which. the course of the trade cycle is smoothed and evened out under the influence of the forces of instructed self-interest.
BIBLIOGRAPHY.-Historical:-C. Juglar, Des Crises Commerciales et de leur Retour Periodique (1889) ; M. Wirth, Geschichte der Handel krisen (189o) ; M. Tougan-Baranowski, Les Crises Industrielles en Angleterre (1913).
General Treatises:—A. Aftalion, Les Crises Periodiques de Sur production (1913) ; M. Bouniatian, Les Crises Economiques (1922) ; J. Lescure, Des Crises Generales et Periodiques de Surproduction (1923) ; A. C. Pigou, Industrial Fluctuation (1926) ; W. C. Mitchell, Business Cycles (1927).