178

A TREATISE ON MONEY

BK. Ill

there will be no position of equilibrium until either (a)all production ceases and the entire population starvesto death ; or ( b ) the thrift campaign is called off orpeters out as a result of the growing poverty; or (c)investment is stimulated by some means or another sothat its cost no longer lags behind the rate of saving.

(iii.) Theories of Over-saving

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Economists are familiar with a class of theorieswhich attribute the phenomena of the Credit Cycleto what is described as “ Over-saving ” or “ Under-consumption At bottom these theories have, Ithink, some affinity to my own. But they are notso close as might be supposed at first sight. Thetheories of Bouniatian and the European writers in-fluenced by him, of Mr. J. A. Hobson in England and ofMessrs. Foster and Catchings in the United States , whoare the best-known leaders of this school of thought,are not in fact over-saving or over-investment theories,if these terms be given the same sense that I havegiven to them. They have, that is to say, nothingto do with saving running ahead of investment orvice versa. They are concerned, not with the equi-librium of saving and investment, but with the equi-librium of the production of instrumental capital-goodsand the demand for the use of such goods. Theyattribute the phenomena of the Credit Cycle to aperiodic over-production of instrumental goods, withthe result that these instrumental goods facilitate agreater production of consumption-goods than thepurchasing power in the hands of the public is capableof absorbing at the existing price-level.

In so far as these theories are capable of anyreconciliation with mine, it is at a later stage in thecourse of events ; for in certain cases a tendency forthe rate of investment to lag behind the rate of savingsmight come about as the result of a reaction from