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

Bank Credit Expansion and Its Effects on the Economic System 297of net income, which coincides exactly with the amount spenton final consumer goods during the period.SOME ADDITIONAL CONSIDERATIONSWe must now discuss some important additional considerationsregarding our outline of the stages in the productionprocess:1. The arbitrary selection of the time period of each stage.First we must state that the decision to make each stagelast one year was purely arbitrary, and any other time periodcould have been chosen. We decided on one year because thatis the business and accounting period most commonly used,and therefore it makes the proposed illustrative outline of productivestages easier to understand.2. The avoidance of the erroneous concept of “average period ofproduction.”Second, we should indicate that the five-year duration ofthe production process in our example is also purely arbitrary.Modern production processes are highly complex, as weknow, and they vary greatly from one sector or business toanother, with respect to the number and duration of stages. Atany rate, it is unnecessary and pointless to refer to an “averageperiod of production,” since a priori estimates of the lengthof any particular production process depend on the specificprocess itself. We know that capital goods are actually theintermediate stages in a production process initiated by anentrepreneur. From a subjective point of view, a productionprocess always has a beginning, the specific moment at whichthe actor first perceives that a particular goal is worthwhile tohim, and a certain set of intermediate stages which he conceivesin advance and later attempts to carry out as he acts.Hence our analysis is not based on the idea of an “averageperiod of production” and is therefore immune to criticism ofthat concept. 29 In fact all production periods have a specific29 John B. Clark, “The Genesis of Capital,” Yale Review 2 (November1893): 302–15; and “Concerning the Nature of Capital: A Reply,” Quarterly