The Kinetic Theory of Economic Crises 63 



economic and kinetic standpoint that explanation of political 

 phenomena must proceed. 



The crisis is thus the door between two economic environ- 

 ments. How it is such a door is only to be explained by refer- 

 ence to the kinetic industrial process. It is not true, as the static 

 economics would assume, that the crisis is a mere sport that may 

 never happen again, an impudent disarrangement of preconceived 

 laws, which it is beneath our dignity to explain. The crisis is 

 that moment when the manifestation of the accumulated little 

 changes first occurs in full size ; it is the supreme moment for 

 the kinetic analysis. M. Clement Juglar says that the crisis is 

 the end of the rise of prices. 1 The difference between these 

 definitions is that between a broadly systematic point of view 

 and that simply of the most important category in active mani- 

 festation. 



VIJ 



THE THEORY OF THE CRISIS 



(Continued) 



B. The Process 



The pain of the crisis does not come from the general dimin- 

 ution of production 2 so much as from the rearrangement of 

 individual fortunes. The process of liquidation, while it does 

 not stop production, does reduce to zero or greatly decrease the 

 rate of increase in production, which is one of the signs recog- 

 nized by Mill and others as a test of economic progress. It is 

 this personal inconvenience of the necessity of liquidation, there- 

 fore, that is to be accounted for. The simple principle of selec- 

 tion by the environment now stands us well in hand. As in all 

 organisms,- so in society, the larger controlling influences do not 

 operate always by a gradual process of differentiation While 

 the idea of continuity and of continual development by infinitesi- 

 mal differentiation is doubtless to be insisted upon as the more 



1 "Lacrise seraitdonc l'arret de la hausse des prix ', e'est-a-dire le moment 

 ou l'on ne trouve plus de noveaux fireneurs." Des Crises Commerciales, p. 

 14, cf. p. 33. 



2 In 1884 and 1894 the fall in freight earnings and in iron and steel pro- 

 duction was comparatively small. 



63 



