OH. 13
prices, whicli, by causing tbe receipts of entrepreneursto fall below tbe normal, influences them to offer lessemployment all round ; and this, sooner or later,brings down tbe rate of earnings in tbe same proportionas that in wbicb prices bave fallen ; at wbicb point anew position of equilibrium can be established. Nowno writer, so far as I know, bas clearly distinguishedthese two stages, i.e. tbe fall of prices and tbe fall of tbecosts of production, tbe initial fall of prices havingbeen treated as if it were tbe end of tbe story. Butbow far previous writers bave perceived that to dis-courage investment relatively to saving is in itselfcalculated to reduce prices is more difficult to say.
Tbe published observations of Marshall, mainly inhis evidence before tbe Gold and Silver Commission(1887) and tbe Indian Currency Committee (1898) leaveme with no clear conviction as to what bis positionwas. Marshall certainly conceived of an additionalsupply of money as reaching tbe price-level by meansof a stimulation of investment (or speculation) througha lower Bank-rate. His position is most clearlystated in tbe three passages following :
“ If there is an extra supply of bullion, bankers andothers are able to offer easy terms to people in business,including the bill brokers, and consequently people enterinto the market as buyers of things, as starting newbusinesses, new factories, new railways, and so on.” 1
“ The supply of loans on the one hand and the desireof people to obtain loans on the other, having fixed therates of discount at anything, 8, 6, 5, or 2 per cent., thenthe influx of a little extra gold, going as it does into thehands of those who deal in credit, causes the supply torise relatively to the demand ; the rate of discount fallsbelow its equilibrium level, however low that was, andtherefore stimulates speculation. . . . This new rateaffects the equilibrium by causing capital to go into thehands of specula'tors who would not take capital at theold rate, but do take it at the new ; and whatever form
1 Cold and Silver Commission, No. 9677, Official Papers, p. 49.