The Kinetic Theory of Economic Crises 57 



One theory claims that capital increases much faster than wages 

 advance. Capital is, however, dependent upon wages for a mar- 

 ket for products. The lack of wages causes a lack of a market, 

 the failure of the capitalists, and a crisis. The trouble with this 

 theory is, as Professor J. B. Clark has pointed out, that capital is 

 not dependent uniformly upon wages for a market. 1 Another 

 theory varies the above somewhat by showing that producers 

 seek to combat falling prices by widening the market, thus exag- 

 gerating the original evil. These theories are pessimistic and 

 inorganic. They suppose that the natural tendency of industry 

 is to gravitate into a state of chaos from which it can only be 

 saved by a clever tour de force, or by the introduction of a new 

 order of things conceived by the ingenuity of a mere man. In 

 other words, industry proceeds organically on a continuous down- 

 ward course, but the organism contains no corrective, no bal- 

 ance-wheel, no ability to right itself. The thought is pseudo- 

 organic for a while, but, at a certain point, ceases to be organic 

 at all and passes off into the realm of prepossession and idealism. 



Perhaps the best explanation of a crisis flows from the theory 

 of undervaluation of future goods. If present goods are not 

 valued highly enough and future goods too highly, there will be 

 too much absorption of present goods ; — this will be followed by 

 a dearth of present goods and a tumble in future values (i. e., 

 promises). This theory of V. Bohm-Bawerk, which he has not 

 specifically applied to crisis phenomena, is thoroughly kinetic 

 and must form a large part of any comprehensive theory of a 

 crisis. By itself, however, it does not explain the larger social 

 and teleological bearings of crisis phenomena, only the mechan- 

 ism of some important price manifestations. It is essentially 

 kinetic, however, in that it gives due prominence to the element 

 of time. The time point of view is similar to the kinetic ; time is 

 a compendious term for all that happens successively or histori- 

 cally ; without happenings there can be no time ; a time theory is 

 therefore a theory of those general changes that take place in 

 industry viewed abstractly from the position of pure sequence. 

 Hence a time theory must be very closely allied to a theory of 

 progress. 



1 Introduction to Rodbertus' Theory of Crises. 



57 



