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A TREATISE ON MONEY

BK. Ill

(ii.) An Illustration

A parable or illustration may possibly make theconclusion clearer—or at least more vivid. Let ussuppose a community owning banana plantations andlabouring to cultivate and collect bananas and nothingelse; and consuming bananas and nothing else. Letus suppose, further, that there has been an equili-brium between saving and investment in the sensethat the money-income of the community, not spenton the consumption of bananas but saved, is equalto the cost of production of new investment in thefurther development of plantations ; and that theselling price of bananas is equal to their cost of pro-duction (including in this the normal remuneration ofentrepreneurs). Finally, let us suppose, what is plaus-ible, that ripe bananas will not keep for more than aweek or two.

Into this Eden there enters a Thrift Campaign, urgingthe members of the public to abate their improvidentpractices of devoting nearly all their current incomesto buying bananas for daily food. But at the sametime there is no corresponding increase in the develop-ment of new plantations—for one or other of manyreasons: it may be that counsels of prudence areinfluencing entrepreneurs as well as savers, fears offuture over-production of bananas and a falling price-level deterring them from new development; or tech-nical reasons may exist which prevent new develop-ment at more than a certain pace ; or the labourrequired for such development may be highly specialisedand not capable of being drawn from labour ordinarilyoccupied in harvesting bananas ; or there may be aconsiderable time-lag between the initial preparationsrequired for development and the date of the bulk ofthe expenditure eventually required by it. What, insuch a case, will happen ?