Thorstein Veblen
Review author of: 'Financial Crises and Periods of Industrial and 
Commercial Depression'. By THEODORE E. BURTON. New York: D. Appleton & Co., 
1902. 12mo, pp. ix + 392.
The Journal of Political Economy, vol. 11, No. 2 (Mar., 1903), pp. 324-326.
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Mr. Burton's survey of crises and depressions is valuable chiefly as a 
brief and compendious review of the facts and of opinions that have been 
offered in explanation of these phenomena. It is occupied more with a 
recital of definitions, symptoms, and palliatives than with an inquiry into 
the causes and the more enduring consequences of these disturbances of 
trade. Indeed, the author has apparently no sure grasp of the difference 
between chronological sequence and causal connection. This holds true in 
spite of the fact that the volume is in form a defense of the thesis that 
crises (particularly those followed by depression) are caused by "waste or 
excessive loss of capital, or its absorption, to an exceptional degree, in 
enterprises not immediately [325] remunerative" (p. 68). "In some form or 
other this waste, excessive loss, or absorption, is the ultimate or real 
cause." By "capital," it may be remarked, Mr. Burton means "production 
goods," not funds, although he speaks as if the two categories were for his 
purposes identical; while he pays close attention to definitions, as being 
of fundamental importance to the clarity of his discussion, his definitions 
do not touch this distinction. Hence, a shrinkage of the marked values of 
securities and other investments is taken to signify a loss of material 
means of production (see, e. g., pp. 81-97). Broadly, crises, and more 
particularly depressions, are caused by waste of the means of production, 
so that the crisis and the subsequent depression are the effects, perhaps 
rather the manifestation, of material impoverishment. The impoverishment 
may be of a permanent character, in case of an extensive destruction of 
goods or a failure of the productive processes of industry, or it may be 
transient, as in the case of excessive investment for future production 
instead of present needs. This waste may not be evident at the time; it may 
not, indeed it commonly will not, appear until all that is available for 
wasteful expenditure has been spent; but in the end the spendthrift 
community will have to meet the privation which it has prepared for itself 
through unwise spending of its accumulations. The discrepancy between 
current needs and current output shows itself in the form of a stringency, 
a shrinkage of values, and a fall of prices. It is this eventual collapse 
of prices and of capitalized values that serve Mr. Burton as evidence that 
a wasteful expenditure has previously taken place. Of course, there are few 
students of economic phenomena today so incautious as to confuse a decline 
in prices, whether of consumable goods or of production goods, with a 
destruction of material wealth, whether it be considered as articles of 
consumption or as means of production. But this is, in substance, what Mr. 
Burton repeatedly resorts to in his explanation of waste, particularly 
under caption III, on "The Inevitable Changes Resulting from Modern 
Industrial and Commercial Progress." For instance: "No statistics can be 
obtained to measure the lose by the absolute dismantling or diminished 
efficiency of manufacturing plants made necessary by the competition of 
improved machinery; but this loss is very large, and is most keenly felt in 
countries where increase in wealth is greatest." The notion of a waste of 
means of production taking the form of an increased aggregate efficiency of 
the means of production has a certain charm, although it does not carry 
conviction. This Hibernian logic seems to satisfy Mr. Burton, however.
[326] On the whole, Mr. Burton's explanation of crises and depressions, as 
set forth in this chapter on the Causes, may be summed up as a painstaking, 
though not very systematic, rehearsal of commonplaces, for the most part 
discredited by modern students. His review, in chaps. v and vi, of the 
"Indications of Prosperity and Depression," and of "Crises and 
Depressions," respectively, is valuable as a sketch of the phenomena 
commonly observed under the two contrasted conditions of trade. The like is 
true of the "Account of Crises and Depressions in the United States," in 
chap. viii; whereas the discussion of "Preventives and Remedies," in chap. 
vii, belongs in the same class of inconsequential commonplace as the 
account of the Causes. The most substantial item in the volume is the 
bibliography (pp. 347-77), compiled by Mr. Williams.
V.