the trouble is lack of purchasing power. He
observes that there are some people who would like to buy more of some
of these things, but that such people lack income with which to buy.
Usually he asserts that this is because production grows faster
than wages, wages being fixed, as he believes, by the minimum
of subsistence--a theory akin to the iron law of wages. In both
over-production and under-consumption theories, the inequality of
demand and supply is looked upon as a general one. There is supposed
to be not merely an unequal and mistaken distribution of production,
but a general excess of productive power.

The wide vogue held by these views would justify a fuller discussion
and disproof of them here, did space permit. It must suffice to
indicate merely that they have the same taint of illogicalness as the
"fallacy of waste," and the "fallacy of luxury."[9] They overlook the
fact that an income, either of money or of other goods, coming even
to the wealthiest, will be used in some way. It may be used either
for immediate consumption or for further indirect use in durable
form. Through miscalculation there may be, at a given moment, too many
consumption goods of a particular kind, but the durable applications
can find no limit until the inconceivable day when the material world
is no longer capable of improvement. At the time of a crisis, there is
unquestionably a bad apportionment of productive agents, and a still
worse adjustment of their valuations, but these facts should not be
taken as proving that there is an excess of all kinds of economic
goods.

Sec. 9. #Monetary theories of crises.# Another group of theories explains
the crises as being due to money, either too much or too little. The
unregulated issue of bank notes has been assigned as the cause of
crises, especially under the circumstances accompanying such crises
as those of 1837 and 1857 in America, when bank note issues greatly
contributed to the unsound expansion of credit. The issue of
government paper money years before, leading to inflation and
speculation, was by many believed to be the cause of the crisis
of 1873. The reverse view is taken by the advocates of a cheap and
plentiful money. They say that these crises were caused, not by the
expansion, but by the contraction of the money stock; for example, not
by the inflation of prices through the issue of greenbacks in 1862 to
1865, but by the contraction of the currency from 1866 to 1873.