demands will follow, and
all the conditions required to make the theory applicable are supplied.

Certain conclusions may be stated at once. Firstly, the industrial
situation is rarely so balanced, no matter what the price situation,
that a measure of wage increase may not be possible without an
equivalent increase in prices. The distributive situation is never one
of static equilibrium. The gain of one group or agent of production may
simply be another's loss. Each group or agent strives for a large
return. If wages go up, profits may go down, or new methods of
production may be devised, or strikes may cease. The same possibilities
exist in essentials, irrespective of any prior price movement. The
movement of prices upward simply gives ground for the presumption that
there is a greater possibility than usual of increasing wages without
causing equivalent price increases.

It is incorrect to reason that all participants in distribution must
come off equally well in this succession of changes. A continuous
testing out of the distributive effectiveness of the various agents of
production, and of any divisions which may exist within each agent,
occurs. The various groups of wage earners may be better or worse off
than before. When the price level has shown a prior tendency to rise,
there is good reason to believe that the wage earners stand to gain by a
vigorous policy of assertion. For then in particular, unless the general
rise in prices is to be accounted for by a reduction in the general
productivity of industry (a possibility always to be considered), wage
increases can come out of the extra income which the other agents are in
receipt of because of the price movement.

Secondly, in normal times the process visualized could not go on
indefinitely. Sound banking practice imposes a limit upon credit
expansion. In an abnormal time such as Europe is now passing through
credit expansion may, indeed, continue beyond the point dictated by
banking reserves. Thus depreciation ensues. This, in turn, is ordinarily
limited by the desire to return to a gold basis; otherwise it results in
financial chaos. Barring out this last eventuality, the process of price
change has a final limit, which must set a limit upon wage increases.

What these general theoretical propositions regarding the idea of the
vicious circle do show, is that this idea is in itself an attempt at a
complete theory of distribution. That theory, if consistently