CH . 2 POSTULATES OF THE CLASSICAL ECONOMICS 21

an individual, by which he enriches himself withoutapparently taking anything from anyone else, must alsoenrich the community as a whole; so that (as in thepassage just quoted from Marshall) an act of indi-vidual saving inevitably leads to a parallel act of invest-ment. For, once more, it is indubitable that the sumof the net increments of the wealth of individuals mustbe exactly equal to the aggregate net increment of thewealth of the community.

Those who think in this way are deceived, neverthe-less, by an optical illusion, which makes two essentiallydifferent activities appear to be the same. They arefallaciously supposing that there is a nexus which unitesdecisions to abstain from present consumption withdecisions to provide for future consumption; whereasthe motives which determine the latter are not linkedin any simple way with the motives which determinethe former.

It is, then, the assumption of equality between thedemand price of output as a whole and its supplyprice which is to be regarded as the classical theory’s“axiom of parallels”. Granted this, all the rest follows—the social advantages of private and national thrift,the traditional attitude towards the rate of interest, theclassical theory of unemployment, the quantity theoryof money, the unqualified advantages of laissez-fairein respect of foreign trade and much else which weshall have to question.

VII

At different points in this chapter we have madethe classical theory to depend in succession on theassumptions:

(I) that the real wage is equal to the marginal dis-

utility of the existing employment;

(2) that there is no such thing as involuntary unem-

ployment in the strict sense;

(3) that supply creates its own demand in the sense