ABSTRACT
The under-consumption theories have a long history. In fact, they are almost as old as the science of economics itself. The under-consumption theory is frequently put forward in the following form. There is, it is said, a secular tendency for the volume of production to grow. The population increases. Inventions and improvements raise the output of goods. In its best-reasoned form, the under-consumption theory uses "under-consumption" to mean "over-saving". Saving may lead to depression because savings do not find an outlet in investment. Savings lead on the one hand to a fall in the demand for consumers' goods, because the money saved is not spent on consumption. On the other hand, savings are, as a rule, invested productively. According to the over-saving (under-consumption) theory, the equilibrium is upset by the opposite course of events—that is, by a decrease in the demand for consumers' goods.
