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

324 Money, Bank Credit, and Economic CyclesMoreover the increase one might expect to observe in theprices of the factors of production (capital goods, labor andnatural resources) as a result of the greater demand for themin the fifth stage does not necessarily occur (with the possibleexception of very specific means of production). In fact eachincrease in the demand for productive resources in the stagesfurthest from consumption is mostly or even completely neutralizedor offset by a parallel increase in the supply of theseinputs which takes place as they are gradually freed from thestages closest to consumption, where entrepreneurs are incurringconsiderable accounting losses and are consequentlyobliged to restrict their investment expenditure on these factors.Thus for entrepreneurial coordination to exist between thestages in the productive structure of a society which isimmersed in a process of increased saving and economicgrowth, it is particularly important that the corresponding factormarkets, especially the markets for original means of production(labor and natural resources), be very flexible and permitat a minimum economic and social cost the gradualtransfer of these factors from certain stages of production toothers.Finally the drop in investment in the consumer goods sector,which tends to stem from accounting losses generated bythe increase in voluntary saving, normally accounts for a certainslowdown in the arrival of new consumer goods to themarket (regardless of the increase in the stock of them). Thisslowdown lasts until the rise in the complexity and number ofstages in the production process unquestionably improvesproductivity, which in turn brings a significantly larger quantityof consumer goods to the market. One might expect thetemporary reduction in the supply of consumer goods to pushup their price, other things being equal. However this rise inprices does not materialize, precisely because from the outsetthe decrease in supply is more than compensated for by theparallel fall in the demand for consumer goods, a result of theprior increase in voluntary saving.To sum up, the increase in voluntary saving is invested inthe productive structure, either through direct investments orthrough loans granted to the entrepreneurs of the productivestages relatively distant from consumption. These loans are