OH. 18 CHANGES DUE TO INVESTMENT FACTORS 283

internal-combustion engine, or a shortage of housesdue to a growth of population, or more settled condi-tions in a country where previously the risks of normaldevelopment had been excessive, or a Capital Infla-tion due to psychological causes, or a reaction stimu-lated by cheap money from a previous period of under-investment, i.e. a previous slump . 1 If they are to puttheir projects into operation, they must either attractfactors of production from other employments or em-ploy factors previously unemployed.

Let us begin with type (i.) above where factors pre-viously producing consumption-goods are now turnedon to producing capital-goods. In this case no effectwill be produced on prices until after an interval oftime equal in length to the process of production ofthe consumption-goods which were previously, but areno longer, being made. For during this interval earn-ings are as before and the output of available goodsis also as before. But after the expiry of the appro-priate interval, whilst earnings will be unchanged, theamount of available output will fall off to an extentcorresponding to the amount of consumption-goodspreviously, but no longer, made—with the result thatthe Consumption Price-level will rise, unless there is acorresponding increase in the proportion of earningssaved. The upward-price phase of the Credit Cyclewill have made its appearance.

It is to be observed that prices will necessarily haverisen more than in proportion to a rise, if any, in thecosts of production. It is not necessary to assume thatthe change-over from one kind of production to anotheris achieved without an increase in the cost of produc-tion (i.e. in earnings)—that is to say, without anyIncome Inflation. Indeed the change-over will often,perhaps usually in the contemporary world, come

1 War-expenditure, not covered by taxation, is most conveniently re-garded for the purposes of the present argument as a sudden increase ofinvestment; cf. Vol. ii., Chapter 30.