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

332 Money, Bank Credit, and Economic Cyclescapital goods and by investing in new stages further fromfinal consumption.It is important to remember that all increases in voluntarysaving and investment initially bring about a decline in theproduction of new consumer goods and services with respect tothe short-term maximum which could be achieved if inputs werenot diverted from the stages closest to final consumption. Thisdecline performs the function of freeing productive factorsnecessary to lengthen the stages of capital goods furthest fromconsumption. 53 Furthermore the consumer goods and servicesleft unsold as a result of the rise in voluntary saving playa role remarkably similar to that of the accumulated berries inour Robinson Crusoe example. The berries permitted Crusoeto sustain himself for the number of days required to producehis capital equipment (the wooden stick); during this timeperiod he was not able to devote himself to picking berries“by hand.” In a modern economy, consumer goods and serviceswhich remain unsold when saving increases fulfill theimportant function of making it possible for the different economicagents (workers, owners of natural resources and capitalists)to sustain themselves during the time periods that follow.During these periods the recently-initiated lengthening ofthe productive structure causes an inevitable slowdown in thearrival of new consumer goods and services to the market.This “slowdown” lasts until the completion of all of the new,more capital-intensive processes that have been started. If itwere not for the consumer goods and services that remainunsold due to saving, the temporary drop in the supply ofnew consumer goods would trigger a substantial rise in therelative price of these goods and considerable difficulties inthe provision of them. 5453 See Hayek, The Pure Theory of Capital, p. 256.54 In the words of Hayek himself:All that happens is that at the earlier date the savers consumeless than they obtain from current production, and at the laterdate (when current production of consumers’ goods hasdecreased and additional capital goods are turned out . . .)they are able to consume more consumers’ goods than they