DURABILITY OF CONSUMER GOODS AND BUSINESS INSTABILITY

s of Doctoral Dissertations 485 study finds that its "weakening" is transmitted through inventory investment or disinvestment and results in the cyclical change in employment of production workers at the manufacturing level. Thus, as cycles moved away from consumer-durables-stock-exhausting periods, the inventory disinvestment in consumer durable-indivisible goods industries during downturns had a tendency to increase relative to the inventory disinvestment in other industries; and the greater the inventory disinvestment, the greater the contraction of employment in that industry. 3. Though, as the cycles moved away from the consumer-durables-stock-exhausting periods, the consumer durable-indivisible goods sector tended to weaken (a condition of saturation), the nondurable-divisible consumer goods sector tended to strengthen and the producer goods sector tended to show unusual confidence and vigor. In an economy where resource-allocation is specialized and immobile, the weakened consumer durables sector tends to render the economy vulnerable for a downturn despite the steady growth in the other sectors. Thus, the farther the cycle is away from wars or severe depressions, the greater the contribution by the consumer durables sector to initiate a cyclical downturn. 4. The portion of consumer durables expenditures financed by instalment credit is greater during the post-World War II period than during the post-World War I period. The study observes that the relatively greater portion of instalment credit in consumer durables expenditures means: (1) greater ease for consumers to allocate income for purchasing durables, and (2) greater "forced saving" through instalment debt repayment during recessions at the expense of consumer non-durables expenditures. Consequently, (1) the postWorld War II mild recessions showed less strength and growth in consumer non-durables expenditures than in the interwar mild recessions, and (2) the portion of durables expenditures in total consumer outlay exhibits a trend of growth at the expense of that of the nondurables expenditures. The study suggests that the element of instability in the consumers' sector seems to lie in the bunching of demand for durables by the mass, not by the over-saving of the rich. Thus, any countercyclical policy in so far as the consumers' sector is concerned should differentiate the temporal position of the cycle in question. It behooves the policy-makers to impose more stringent controls over the demand for consumer durables in the cycles immediately following the consumer-durables-stock-exhausting periods than in cycles farThis content downloaded from 157.55.39.213 on Sat, 02 Jul 2016 05:55:32 UTC All use subject to http://about.jstor.org/terms 486 The Journal of Finance ther away from such periods. This will break the bunching in the "early" cycles and postpone the date of saturation of consumer durables stock. As a result, the long-run expansion phase of the economy will be elongated. Furthermore, a successful breaking-up of the bunching will provide a cushion against severe contraction through a greater growth of the consumer non-durables sector, since the latter exhibited a great degree of stability over the cycles. Thus, any policy that can encourage the relative growth of the consumer non-durables sector can reduce the amplitude of business instability as a whole. This content downloaded from 157.55.39.213 on Sat, 02 Jul 2016 05:55:32 UTC All use subject to http://about.jstor.org/terms