The Kinetic Theory of Economic Crises 4 1 



act with apparent independence, compete for nutrition, in taking 

 they give in exchange, they respond to a series of stimuli, dis- 

 turbance of their equilibrium is passed on through all other 

 parts, creating corresponding and proportional disturbance in the 

 latter. In so living they progress, and with their progress the 

 whole animal or plant progresses also. 



In all cases, whether social or biological, the process is essen- 

 tially one of a succession of stimuli and of a succession of dis- 

 turbed equilibria. The physical explanation of equilibrium has 

 its classic origin in the field of international trade. That was 

 the field that first attracted man's attention. In rising interna- 

 tional commerce men saw marked, decisive movements that could 

 be distinctly contrasted and measured. It was practicable for 

 large dealers to keep pretty close watch of the quantities of mer- 

 chandise, precious metals, and commercial paper that moved in 

 and out of a country. The conception of a normal equilibrium 

 thus emerged from salient conditions at the dawn, as it were, of 

 the complex organization of industry. To extend this concep- 

 tion to the vastly larger field of domestic industry is the task of 

 the systematic bringing together of theory and experience. In 

 the category of credit this task has been partially accomplished ; 

 in the categories of production, consumption, and distribution it 

 has barely begun. 



Consulting statistics of trade balance 1 we note that, conforma- 

 bly with the general movement for paying off our foreign war 

 debt, which began in 1875, simultaneously with or just before 

 the deficiency in English and Continental harvests that lasted 

 roughly from 1875 till 1881, the years 1880 and 1881 mark a 

 rather large surplus of exports. There was heavy railroad build- 

 ing at home, 1879-81. The equilibrium of production at home 

 was thus disturbed in the direction of a heavier demand for 

 rails ; abroad, the equilibrium of agricultural demand and supply 

 was disturbed by deficient supply due temporarily to poor crops, 

 but in the long run due to a comparatively high cost of agricul- 

 tural production. The poor crops were a short-time cause, an 



x Cf. Monthly Summary of Commerce and Finance, June, 1900, p. 3424, 

 Imports and Expects of Merchandise and Excess of Exports over Imports. 



41 



