Towards Reasonableness in Cycle Theory, II
Haberler said much the same thing as I was pointing at yesterday, of course having arrived at this opinion decades before I did:
It is true, a horizontal maladjustment alone (that is to say, an over-delopment of a particular branch of industry) can explain only a partial -- as opposed to a general -- depression for the reason that, if industry A is over-developed, there must be an industry B which is under-developed and, if A is depressed, B must prosper. But the same is true, as we have seen, of a vertical maldistribution of the factors of production.
In order to explain a general depression, it is necessary to recognize that a deflationary cumulative process can be set in motion by partial dislocation of the productive process. If this is accepted, there is no difficulty in assuming that such a vicious spiral of contraction may be started by a horizontal, as well as by a vertical, maladjustment in the structure of production. -- Prosperity and Depression, p. 111