The Kinetic Theory of Economic Crises 65 



prospects of industry may create undue variations in the value 

 anticipations of financiers, and to the fluctuations in technical 

 production due to the vicissitudes of the conjuncture, the finan- 

 cial world adds greater fluctuations due to psychological causes. 

 Enthusiasm for speculation finally gives out from sheer bodily 

 fatigue. A slow market in stocks is ascribed to the fact that a 

 prominent operator is taking a trip south. 



The whole process is strangely analogous to what is known in 

 electrical science as "resonance." Let materialistic industry rep- 

 resent the dynamo from which a current proceeds and to which 

 it returns again. The current of credit carries its stimulus from 

 point to point in the ascending psychic scale, at each point finding 

 little reservoirs for storage, so that the current is not uniform at 

 all points of the circuit, until finally, in the highest psychic part- 

 environment, a sort of a "loop" is formed. Here, by means of 

 coils of wire and a pair of Leyden jars, an independent current 

 is induced from the principal current. In other words, not only 

 does the principal current pass through the loop, but the loop has 

 an independent current of its own which is so intense as in case 

 of interruption to generate light rather than heat, — light being 

 a phenomenon of a more psychic order than heat. 1 



In general the analogy of the action of the financial classes to 

 that of an induced electrical current, even when it is entirely 

 unconnected, is strong: the induced current does not start simply 

 because the main curcuit in the field of which it happens to be 

 is in action ; it is necessary that there be some change in the 

 main current in order to start up the induced current. Simi- 

 larly, the world of finance is not capable of starting up a circuit 

 of action on its own account; it must wait until surplus produc- 

 tion has set in motion a larger quantity of floating capital and 

 thus have charged the field with a stimulus oi which it can borrow 

 a part. 



By a mechanism of this nature, periods of speculation begin 

 to arise shortly after the disturbance of the industrial equilibrium 

 or calm which marks the end of the period of liquidation. For 



X I am indebted for this analogy, taken from an experiment of Tesla, to 

 my colleague, Professor George Hart Morse, of the department of electrical 

 engineering. 



5 65 



