XII. Conclusion

CHAPTER XII

CONCLUSION

(1) This essay has concentrated on “idleness” issues and ignored “demand” issues.

WE HAVE now dealt with all the “causes” of idleness. Yet the subject matter of this essay differs fundamentally from that of most recent discussions of “unemployment.” This is because we have rigidly separated “idleness” issues from what are usually regarded as “demand” issues. Our approach has meant that the principal topics of contemporary theorizing, namely, certain forces behind the movement of demand schedules for the services of different sets of resources have been deliberately ignored. We have said nothing about the sort of things commonly discussed in connection with variations of “demand in general.” We are, however, justified in claiming that we have dealt with the “causes” of idleness. For whatever the demand schedule for the services of particular resources may be, if those resources are idle, then one or more of the causes appropriate to the different types of idleness that we have distinguished must be present. The movement of individual demand schedules is certainly relevant because the extent of the various kinds of idleness in the particular resources concerned will frequently tend in practice to vary inversely with such movements. But in respect of each type of idleness, considered in isolation, the removal of the one specific cause will lead to the complete cessation of the unemployment of the type in question, irrespective of the state of the demand schedule. This does not mean that an attempt to consider each type of idleness, in each case, in isolation, could lead to a realistic or useful view of the employment question; for different conditions of idleness in one line of production may obviously react upon those in others. The definitions we have introduced enable us to conceive of proximate causes only. But such causes are important and there is an indefensible tendency to ignore them in contemporary discussions. We may say that forces expressed through the relevant demand schedules in particular sets of productive operations sometimes control the potency of the different causes; but in each case, apart from that of “valueless resources,” the idleness ceases with the elimination of a cause which is independent of those forces.

(2) The present analysis has introduced distinctions which are essential for any satisfactory study of the effects of demand variations.

The peculiar scope which we have chosen may leave the impression that the most important aspects of idleness have in fact been overlooked. But the analysis here attempted seems to be absolutely essential if satisfactory studies of the effects of phenomena usually described as variations of “demand in general” or “general purchasing power” are to be made. If the chaotic controversies in which this study at present abounds are to be cleared up, the implications of the different types of idleness which we have pointed out may have to be faced. We are not sure of the manner in which an application of our distinctions would modify recent inquiries into the nature of general purchasing power. But that they have a most important relevance is surely obvious. Take, for instance, the conceptions of “glut” and “gluttability.” Does the existence of a glut of a commodity mean that all or some of the resources producing it are “valueless,” or that in the glut situation it pays to “withhold capacity”? Surely the whole problem takes on a completely different complexion according to which interpretation is appropriate.

(3) The application of the conceptions of this essay to monetary theory has yet to be done

It has been alleged of more than one contribution to the social sciences that the author has left the impression of packing a trunk in preparation for a long voyage of exploration but has got no farther than his own doorstep. It may well be that others may set out on the travels for which we have here made preparations. We are not sure of what will be discovered, but a clear and simple map is urgently needed. At present, either the thinking behind or else the exposition of time-preference and liquidity-preference studies is hopelessly confused.

(4) The conceptions of this essay are relevant to the non-monetary aspects of idleness

But this essay is intended to be much more than mere trunk packing. We believe that the conceptions which it isolates are directly relevant to contemporary policy outside the monetary field as well as to prospecting within it. Although currency controversies await solution, many of the most acute problems which confront the policymakers of today will survive any advance in scientific insight into currency theory, or growth of enlightenment in currency policies. May it not be that Marshall was shrewdly correct in his continuous preaching that the “only thing to be said about currency is that it is not nearly as important as it looks”? As the present writer emphasized some years ago, “it is easy to expect too much to be accomplished by an ideal monetary mechanism. The recognition of certain deficiencies in an existing regime may lead us to suppose that the right system of money, if we could only find it, would automatically correct the results of the refusal to make otherwise desirable adjustments in many spheres.”¹ But “the perfect monetary system would not prevent the perpetual fight between productive efficiency (enforced where competition is effective), on the one hand, and the vested interests which determine the division of the value of productivity (as they can do when competition can be restricted) on the other hand.”²

(5) The conceptions of this essay are relevant to the trade cycle

The notion of variations in “prosperity” can be realistically studied in terms which assume the existence of the ideal monetary system. For is not “prosperity” in fact a distributive rather than a productive concept? Is not a policy which brings “prosperity” in its popular sense one which protects or enhances rates of wages and rates of dividends? And are not these rates of return maintained or raised through the diversion of resources, some of which find inferior employments, and some of which remain in idleness? Does not the distribution of wage-earners tend to be more biased towards the less well-paid types of employment the higher the rates of payment that are insisted upon? And is it not obviously true that typical methods of dividend protection mean that new capital developments are prevented from taking place when they would supply productive services which the market indicates are most wanted—because the competitive effect of such development is felt to be too serious? Is that not at least a partial explanation of the popularity of schemes for subsidized public works in depression? Would we not be still likely to have, even under an ideal monetary system, the occasional emergence (often regarded as a cyclical emergence) of situations in which the apparent reasonableness or profitableness of the monopolistic withholding of productive capacity in the interests of dividends or wage-rates is increased? Would an ideal monetary system in fact put an end to the powerful and painful equalitarian tendencies which all the current attempts to restrict competition have been unable completely to suppress?

(6) The conceptions of this essay may suggest the correct approach to the monetary aspects of idleness

Even before the days when the general form of classical monetary theory began to crystallize, it had been realized that the “quantity of money” was somehow a fundamental force in the determination of “prosperity.” Mercantilist speculations reflected the conviction that scarcity of money was a major disadvantage to be overcome by State policy. And the refinements brought about during the foundation of orthodoxy in the late eighteenth century never denied the phenomena from which Mercantilist beliefs had been derived. Hume observed that the entry of new money into the economic system had the effect of “exciting industry.” And a large part of subsequent study has been indirectly devoted to discovering the exact genesis of such “excitement” of production. In this connection two suggestions appear to be implied by the argument of the thesis here presented: (a) that inquiries in this field ought to be directed in their first stages to the problem of whether the “excitement” brings value to valueless resources; or whether the repercussions of the “excitement” are primarily expressed in the dissolution of withheld capacity and enforced idleness, and only secondarily, if at all,³ in enlarging the range of valuable resources; (b) that inquiries in this field should examine the contention that both in the practical selection of monetary policies under political systems dominated by “pressure groups,” and in the less tangible psychological influences determining typical preference for or tolerance of inflationary theories, the distributive effects have subconsciously loomed more important than the productive. We have suggested that the “prosperity” envisaged in monetary discussions has, in spite of the implication that the condition is accompanied by the absence of idleness, been more of a distributive than a productive concept. And although it is true that the cyclical idleness of resources seems to be a phenomenon of production and not of distribution, it has never been shown that there is anything more than a random periodicity in such cycles of idleness. Our present hypothesis concerning their “occasional emergence” certainly fits the facts as well as most other theories.

(7) Wasteful idleness arises through the restriction of competition

Regrettable idleness, like other forms of “waste,” seems to be the product of arrangements which allow private interest to triumph over social interest. It arises, in other words, because our laws permit competition to be restricted. Hence, no improvement of the monetary system alone is capable of eliminating causes of idleness whilst other existing institutions remain. And this essay has incidentally drawn attention to some of the defects in these institutions. For reform, we shall probably have to wait for the embodiment of social ideals in a consistent philosophy of the functions of the State and the convincing exposition of that philosophy.

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1 Hutt, book review, South African Journal of Economics (December, 1934 ): 476.

2 Ibid., p. 477.

3 The release of productive power may cause the range of valuable resources to contract rather than expand. See chap. 11, paras. 2 and 10.