cap" cap' — A cap'
<cr'.
For ilmpliclL; of BUIemenl, io alt thiH no account U taken of the element of risk, nor of Ibe fluctuaUons of discount rates or the TariAtiona of volume of output. If these be included i[i the calculation aa variables, the result is much the »nine. They are functions of the variables already included, and tlieir inclusion would, on the whole, accentuate Uie oscillations ahown bj the oompulatlon as it stands.
THE THEORY OF MODERN WELFARE 205
cutting under the ruling prices of products, which lessens the profits of competing firms and throws them into the class of insolvents, and so extends the readjustment of capitalization.
The point of departure for the ensuing sequence of liquidation is not infrequently the failure of some hanking house, hut when this is the case it is pretty sure to be a bank whose funds have been "tied up" in "unwise" loans to industrial enterprises of the class spoken of above.'
The abruptness of the recapitalization and of the redistribution of ownership involved in a period of liquidation may he greatly mitigated, and the incidence of the shrinkage of values may be more equably distributed, by a judicious leniency on the part of the creditors or by a well-advised and discreetly weighted extension of credit by the government to certain sections of the business community. Such measures of alleviation were had, with liappy effect, in the case of a recent stringency which is sometimes spoken of as an averted crisis. But where the situation answers the specifications