52 ECONOMIC ESSAYS IN HONOR OF JOHN BATES CLARK
except that prices, shares in distribution and the allotment of
productive factors are not at their static levels, and then to
focus attention on the processses by which the ensuing adjust-
ments will be made as economic forces seek their levels. Car-
ried out with vision and imagination, such a study would go a
long way toward the development of dynamics.
Dynamics, then, is not limited to the examination of the dis-
crepancies between actual values and their static levels. Nor is
its study of processes to be confined within the subject-matter of
value and distribution as such; since these processes reach out into
all aspects of life. To illustrate this, we might start with the
narrowest possible problem that can be called dynamic: that of
discrepancies between actual values and their static levels, and
see how far this problem will carry us in the search for a
solution.
Why do prices seldom reach their supposed static level and
never remain there? The answer involves the whole baffling prob-
lem of the business cycle. Among the causes of this phenomenon
are, apparently, original disturbances from outside the economic
system proper; such as wars or climatic cycles affecting agricul-
ture; but the character of the cycle is more directly determined
by the processes through which the business system adjusts itself
to these disturbing forces. Here it appears that there are not
merely forces of the kind which may be described as self-limiting,
but others of the cumulative sort, and that the self-limiting
factors do not operate effectually until after the cumulative forces
have driven things so far that a reaction is produced, which in
turn goes so far as to produce another revulsion. The study of
this process leads into the realms of the credit mechanism—or
organism—markets and contracts, the interrelations of debtor
and creditor interests, and of buyer and seller interests, technical
factors governing the behavior of costs of production under con-
ditions of varying output, forms of contracts governing the finan-
cial incidence of these variations, the relative responsiveness of
labor costs to such changes and, underlying this, all the elements
of bargaining position, customary standards and other psycho-
logical elements influencing the behavior of wages, and many
other factors. In short, the problem reaches out into the fields of
technical production, of human nature and of social institutions.
We are carried, for instance, into a treatment of wage levels (and
