Page:Confessions of an Economic Heretic.djvu/133

 these terms serve, can only be usefully studied as statistical facts and forces. The natural predilection for exactitude which, as has already been pointed out, is part of the mental equipment of scientific students, has thus been strengthened by the instability of money, credit, prices, and exchange in the post-War world.

Mr. R. G. Hawtrey is the most authoritative exponent of purely monetary explanations of our economic troubles.

It is, of course, true that in every depression there is a “shrinkage of demand” and “a shrinkage of the flow of money.” This last Mr. Hawtrey attributes to something he calls “the inherent instability of credit” without explaining why this instability is “inherent.” For why does the flow of money, i.e. credit, shrink at certain places in the trade cycle? Apart from “shrinkage of demand” in general, there may occur misapplications of demand. If, as I contend, such misapplication occurs in normal periods of