Page:The Economics of Unemployment.djvu/58

the consuming public to take full advantage of the falling prices to purchase and consume a larger quantity of goods than before, their incomes remaining at their former level. But this is where the conservatism of consumption operates. Though falling prices will stimulate some increased consumption, this increase will not be large or quick enough to furnish an effective check upon the fall of prices. In other words, when money incomes remain the same, falling prices will stimulate more saving, at a time when more saving is not wanted and so reduce the efficacy of this check on gluts. This imperfect operation of the check of falling prices causes what otherwise might have been a 'tendency to glut' to harden into an actual substantial glut, the condition with which we are familiar at the beginning of a cyclical depression. This glut causes a considerable stoppage of production and unemployment, usually accompanied by a fall of wage rates for those remaining in employment. This shrinkage of employment, whether wages be reduced or not, is reflected in a reduction of the money incomes of producers. This fall of money income, once set in, stops altogether the already defective operation of the falling prices check. For the purchasing power of the family income soon begins to shrink faster than the fall of prices. In fact, it goes so far as to evoke the operation of a real check which eventually, though with great waste and suffering, sets industry once more upon a rising path. For, when the stoppage of industrial activity with its unemployment has gone a certain distance, it comes up against the other side of the conservatism of consumption. The