Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

Bank Credit Expansion and Its Effects on the Economic System 277example, might take him a month minimum), a plan hewould not be able to carry out without first having saved alarge quantity of berries. Therefore he would either starve todeath or the project, out of all proportion to his potential saving,would soon be interrupted and abandoned. At any rate, itis important to understand that the real saved resources (theberries in the basket) are precisely the ones which enableRobinson Crusoe to survive during the time period he spendsproducing the capital good and during which he ceases togather berries directly. Even though Robinson Crusoe isundoubtedly much more productive harvesting berries withhis wooden stick than he is with his bare hands, there is alsono doubt that the process of berry production using the stickis a more lengthy one in terms of time (it includes more stages)than the production process of berry picking by hand. Productionprocesses tend to increase in length and duration (i.e.,to become more complex and include more stages) as a resultof the saving and entrepreneurial activity of humans; and thelonger and more time-consuming these processes become, themore productive they tend to be.In a modern economy, in which many economic agentssimultaneously perform different functions, we will use theterm capitalist to denote that economic agent whose function isprecisely to save; in other words, to consume less than he createsor produces and to make available to workers theresources they need to live for the duration of the productionprocess in which they participate. (Robinson Crusoe alsobehaved like a capitalist when he saved berries that laterenabled him to survive while he produced his wooden stick.)Thus when the capitalist saves, he frees up resources (consumergoods) which can be used to sustain workers whodirect their energies to productive stages further removedfrom final consumption, i.e., the production of capital goods.Unlike in the example of Robinson Crusoe, productionprocesses in a modern economy are extremely complex, andin terms of time, very lengthy. They incorporate a multitude ofstages, all of which are interrelated and divide into numeroussecondary processes that humans employ in the innumerableaction projects they constantly launch.