stances play a
complicating part in retarding or hastening business recovery.--The
present depression of 1920-21 is almost of unprecedented duration, for
example. Nor should it be supposed that the state of depression must be
identical with the period of price decline.[52] Given favorable
circumstances, the price decline soon leads to a search for new methods
of economy in production. Raw materials are likely to fall in price.
Supplementary costs are rapidly reduced. The price of labor tends to
fall. Even though prices continue to fall slowly, profits may rise to a
level encouraging to business activity. This may also be true of a
period of liquidation not preceded by crisis.

In conclusion, it can only be repeated, however, that confident
generalization as to the direct effects of falling prices is impossible.
Each business cycle has its own peculiar characteristics--it is unique
as Mitchell says.[53]

So, too, as to the indirect effects of a general fall in the price
level. No one description can be given that will hold true of all
instances. If the main cause at work is of the kind that may be called
"natural," for example, a gradual increase in the productivity of
industry, or a decided falling off in gold production, such periods are
not necessarily periods of depression in industry. Employment may be
constant and weekly and yearly earnings high. Thus the period of
1873-1896 in the United States was one of declining prices and it is
generally admitted that that period was one of great industrial
activity.[54] Moments of excessive activity are rarer in periods of
falling prices than in periods of rising prices, but the average amount
of unemployment may be either greater or less. Again, if the decline of
prices is in reality a movement from a state of depreciated paper money
to a gold standard, there is a possibility that the period may be one of
industrial activity due to a prevailing confidence in a coming recovery.
It is more likely, however, that such a period will be characterized by
a falling off in business activity and an increase in unemployment,
particularly at its commencement.

Lastly, if the price movement is an indication of such a period of
depression as may precede and usually does follow serious industrial
crises, it is ordinarily accompanied by liquidation and curtailment of
production. In these periods, and especially at their height,
unemployment grows and earnings fall more than wage rates. O