(I) Stability Influence of Plasticity of Prime Costs, etc.

 

See accompanying letter

I entirely agree,--and have been much enlightened--by what you say here. I would make only one plea, that the paragraph at the bottom of p. 45 might be expanded. [3] Can the importance of "anticipations" be overestimated when discussing the way in which "elasticities" are thought to change? Could you suggest the nature of "the intricate problems involved"? e.g. (very roughly) whether [c] the firm regards the future market fluctuations as controllable by itself; and, if so, whether by "maintaining a state in the market", or by "not spoiling the market". A stabilising influence on sales will be exerted when the market weakens if the firm (i) Regards the future as likely to be worse than the present. AND/OR (ii) Believes its future position is best guarded by maintaining present contacts with its customers. "Destabilising" influences emerge if (i) Future improvement is expected. AND/OR (ii) The firm fears price cutting will seriously limit future price policies. I should much like to see some reference along these customary lines. I believe that it is changes, and anticipations, of this type which are most important during trade fluctuations,--rather than the much more long period forces which you emphasise.--Further it seems to me desirable, as a matter of general method in economic analysis, to bring "anticipations" into the foreground as clearly as possible. You have, of course, a brief reference in the note on "User Cost", p. 84; and a great deal may be covered by your article to which you refer, p. 43, in the "Review of Econom. Statistics", [4] --unhappily I haven't read it so far--.


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