Review - Prosperity and Depression

Review - Prosperity and Depression - Part I,...

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Part I, "Systematic Analysis of the Theories of the Business Cycle," includes seven chapters. The method employed presents the theories in a systematic order, beginning with the less complicated and proceeding to the more complicated. In addition, preference has been given to the more recent and more accessible works. Haberler then proceeds to analyze "The Purely Monetary Theory" of the cycle, which, he thinks, has been most fully and most uncompromisingly set out by Hawtrey. It is concluded that Hawtrey has demonstrated and analyzed the cumulative nature of the process of expansion and contraction, although his propositions are largely taken over from Marshall and the Cambridge tradition. Haberler cannot accept the view that the reason for the breakdown of a boom is always monetary. "The Over- investment Theories" come next, with three subdivisions, namely, the Monetary, those which stress the influence of inventions, discoveries, etc., and changes in the production of consumers' goods. In connection with the first group the writings of Hayek, Machlup, Mises, Robbins, Ropke and Strigl are examined. Haberler concludes that the monetary theory of overinvestment is not in all respects complete and that its claim to exclusive validity is open to doubt. He then passes to Spiethoff and Cassel as representative of the "Non- monetary Over-investment Theories." These writers maintain that the cycle is characterized by changes in the production of capital goods, especially of fixed capital equipment. Their most valuable contribution is their explanation of the breakdown of the boom, but Haberler does not find Spiethoff's explanation very different from that of the monetary overinvestment school (p. 73). In considering overinvestment from changes in demand for finished
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Review - Prosperity and Depression - Part I,...

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