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

302 Money, Bank Credit, and Economic Cycleswere otherwise; that is, if in one of the stages the rate ofaccounting profit or interest were higher, then disinvestmentwould take place, and productive resources would be withdrawnfrom the stages with a lower rate of profit and directedto those with a higher rate of accounting profit. This redirectionof resources takes place until the greater demand for capitalgoods and original means of production in the receivingstage results in an increase in spending on these componentsin that stage; and the greater influx of its final goods tends toreduce their prices, until the differential between income andexpenses decreases, giving rise to a rate of profit equal to thatof other productive stages. This microeconomic reasoning is keyto understanding modifications made to the number and length ofproductive stages; we will later examine these changes.6. Gross and net investment and saving.Sixth, although in the example from Chart V-1 the total netincome received by owners of the original means of productionand by capitalists in the form of profit or interest (100 m.u.)coincides exactly with the sum spent over the period in consumergoods (and thus net saving is equal to zero), there is asignificant volume of gross saving and investment. In factgross saving and investment are reflected in Table V-1, whichindicates for each stage, at the left-hand side of the table, thesupply of present goods offered by savers in exchange forfuture goods. At the right-hand side, we find the correspondingdemand for present goods experienced by the providersof future goods, mainly owners of the original means of production(labor and natural resources) and the capitalists ofearlier stages. We can observe from the table that gross saving,or the total supply of present goods, equals 270 m.u.: overallgross saving which takes place in the economic system and is2.7 times greater than the amount spent during the year onfinal consumer goods. This gross saving is identical to the grossinvestment of the financial year in the form of spending by thecapitalists on natural resources, labor, and capital goods fromprior stages in the production process. 3434 Tables such as Table V-1 have been constructed for the same purposeby Böhm-Bawerk (Capital and Interest, vol. 2, pp. 108–09, where in 1889