h it might incidentally
stimulate) the more efficient use of the resources which remained.

Now this is precisely analogous to the problem of the allocation of
our resources for the purpose of peace. Notwithstanding all the
wastes and maladjustments of the economic system, the use of resources
to produce one commodity _does_ in general curtail the production of
others. The mere launching of a new business enterprise does no more
than the sending of an army to Salonika, to eliminate waste in the
remainder of the economic organism. Unemployment, broadly speaking, is
a function not of the magnitude of the normal demand for labor (which
affects rather the wage-level), but of fluctuations in the demand for
labor; fluctuations from one day to another as at the docks, from one
season to another as in the building trades, above all from one period
of years to another as in the cycles of general trade boom and
depression. Nothing will diminish unemployment which does not serve to
diminish these fluctuations. A new business will not, as a rule, have
any such effect. If it is launched during a trade depression (a most
unusual proceeding), it may temporarily absorb unemployed labor and
idle materials. But when the next boom comes, it will be using, though
presumably to greater advantage, labor and materials which, but for
it, would have been employed for other purposes. Meanwhile the causes
making for unemployment will be unaffected. Miscalculations will
still be made, the building trades will still become slack in the
winter, the casual methods of engaging dock laborers will still
continue, trade cycles will still recur, while beneath them, and
concealed by them, some industries will expand and others will decay.
Thus, like the armies at Salonika, the new business would in effect
divert resources from elsewhere.

This truth needs to be firmly grasped in mind. It is this that makes
it in general unsound policy to subsidize industries, either directly
or indirectly, by means of a protective tariff. It is this, indeed,
that supplies the answer to half the economic fallacies that are
always current.

The allocation of resources so as to yield the maximum effect was
rightly recognized as one of the most vital and difficult of our
war-time problems. To cope with it, the Allied peoples devised one
instrument after another, and finally evolved the Supreme Allied
Council. The analogous problem in the economic world of peace time is
no