CH. 5 EXPECTATION AND EMPLOYMENT 51

the producer’s short-term expectations and not bypast results, the most recent results usually play apredominant part in determining what these expecta-tions are. It would be too complicated to work outthe expectations de novo whenever a productive processwas being started; and it would, moreover, be a wasteof time since a large part of the circumstances usuallycontinue substantially unchanged from one day to thenext. Accordingly it is sensible for producers to basetheir expectations on the assumption that the mostrecently realised results will continue, except in so faras there are definite reasons for expecting a change.Thus in practice there is a large overlap between theeffects on employment of the realised sale-proceeds ofrecent output and those of the sale-proceeds expectedfrom current input; and producers’ forecasts are moreoften gradually modified in the light of results than inanticipation of prospective changes.

Nevertheless, we must not forget that, in the case ofdurable goods, the producer’s short-term expectationsare based on the current long-term expectations of theinvestor; and it is of the nature of long-term expecta-tions that they cannot be checked at short intervals inthe light of realized results. Moreover, as we shall seein Chapter 12, where we shall consider long-term ex-pectations in more detail, they are liable to sudden re-vision.‘Thus the factor of current long-term expecta-tions cannot be even approximately eliminated orreplaced by realised results.

1 This emphasis on the expectation entertained when the decision toproduce is taken, meets, I think, Mr. Hawtrey’s point that input andemployment are influenced by the accumulation of stocks before prices havefallen or disappointment in respect of output is reflected in a realised lossrelatively to expectation. For the accumulation of unsold stocks(or declineof forward orders) is precisely the kind of event which is most likely to causeinput to differ from what the mere statistics of the sale-proceeds of previousoutput would indicate if they were to be projected without criticism intothe next period.