ȀȆȇ Partʺ: Economicsinventories via the price changes which they forecast will effect the desired
results. (HuttȀȈȆȃ, p.Ȁǿȁ, emphasis in original)řōŞŗőŠ ŜŞśŏőşşőş ŠŔţōŞŠőŐ
In passages where he seems about to recognize the natural aspect of price
and wage stickiness (for example,ȀȈȆȃ, pp.ȃǿ–ȃȀ), Hutt does not fol-
low through. He regrets the less than instantaneous operation of market
pressures and returns to the theme that wrong prices in other economic
sectors “merely” make price cuts necessary for market clearing in a par-
ticular sector (ȀȈȆȃ, pp.ȃǿ–ȃȀ,ȇȈ–Ȉǿ). He notes that if an entrepreneur
correctlyexpects a decline in demand for his product to prove temporary,
then letting its inventory grow will turn out to have been a wise invest-
ment. If he proves wrong, then he will have withheld supplies, and his
misbehaviour has depressive effects on other sectors. Market processes,
however, including the natural selection of entrepreneurs, will generally
achieve quick adjustment of prices to market-clearing levels if only they
are allowed to work (pp.ȃȃ–ȃȄ,ȈȆ). Even if government policy aimed at
preventing misbehaviour in the pricing process, it admittedly could not
succeed completely. “Ļere would always be defects in the drafting of the
required legislation, as well as error in enforcement and judicial interpre-
tations” (pp.ȃȀ–ȃȁ). So saying, Hutt again blames imperfect policy rather
than natural conditions. Entrepreneurial pessimism or timidity in depres-
sions has always been “a consequence of the price mechanism having been
prevented from fulfilling its co-ordinative role” (p.ȈȈ). Note the word
“prevented.”
Hutt blames government for not suppressing the basic reason—vil-
lainy—why prices and wages do not clear markets and assure continuous
coordination. He perceives villainy—but the word is mine, not his—on
the part of labour unions, business monopolists, and government itself.
Villainy includes such things as union control over wages, minimum-wage
laws, overgenerous unemployment compensation, and monopoly and col-
lusion. Hutt recognizes that the victims of incorrect pricing are not neces-
sarily the villains. Villainous pricing of particular factors and outputs can
reduce the demands for other outputs, rendering their unchanged prices
wrong and their producers idle (for example, HuttȀȈȆȃ, p.ȇȇ). However,
he is inclined to criticize even these victims of others’ malpricing for not
adapting to the changed situation by adjusting their own prices promptly
and steeply enough (ȀȈȆȃ, p.ȇȂ).