closely looked after than it is in the making of loans on collateral. There results a discrepancy between the effective capitalization during prosperity and the capitalization as it stood before the prosperity set in, and the heightened capital!zation becomes the basis of an extensive ramification of credit in the way of contracts (orders) ; at the same time the volume of loan credit, in set form, is also greatly increased during an era of prosperity.'
An era of prosperity is an era of rising prices. When prices cease to rise prosperity is on the wane, although it may not promptly terminate at that juncture. This follows from the fact that the
' Cf. SombMt, KapitalUmu*, toI. II. oh. L, on the inoti7e lantm »t work In advuicmg busiueu eaWiprlao.
THE THEOBY OF MODERN WELFARE 199
putative increase of earnings on which prosperity rests ia in substance an apprehended differential gain in increased selling price of the output over the expenses of production of the output. Only