ABSTRACT
This chapter proposes to analyse some closely related theories of a great number of writers, which may be labelled generically "over-investment theories". According to the over-investment theories, fluctuation in investment is the cause of the business cycle, and the forces which bring about expansion have a direct effect on investment—viz. on investment in fixed capital. The chapter distinguishes three sub-groups. Writers who believe that monetary forces operating under a particular form of credit organisation (banking system) produce the disequilibrium between the lower and higher stages of production. The group consists of writers whose theories do not run in terms of money. There is a third view which adds much to the force of the over-investment theory—namely, the theory that changes in the production of consumers' goods give rise, for technological reasons, to much more violent fluctuations in the production of producers' goods in general and fixed capital equipment in particular.
