CH. 8 THE PROPENSITY TO CONSUME: I 91

of its income, (ii) partly on the other objective attendantcircumstances, and (iii) partly on the subjective needsand the psychological propensities and habits of theindividuals composing it and the principles on which theincome is divided between them (which may suffermodification as output is increased). The motives tospending interact and the attempt to classify them runsthe danger of false division. Nevertheless it will clearour minds to consider them separately under two broadheads which we shall call the subjective factors and theobjective factors. The subjective factors, which weshall consider in more detail in the next Chapter, includethose psychological characteristics of human natureand those social practices and institutions which,though not unalterable, are unlikely to undergo amaterial change over a short period of time exceptin abnormal or revolutionary circumstances. In anhistorical enquiry or in comparing one social systemwith another of a different type, it is necessary to takeaccount of the manner in which changes in the subject-ive factors may affect the propensity to consume. But,in general, we shall in what follows take the subjectivefactors as given; and we shall assume that the pro-pensity to consume depends only on changes in theobjective factors.

II

The principal objective factors which influence thepropensity to consume appear to be the following:

(1) A change in the wage-unit.—Consumption (C)is obviously much more a function of (in some sense)real income than of money-income. In a given stateof technique and tastes and of social conditions deter-mining the distribution of income, a man’s real incomewill rise and fall with the amount of his command overlabour-units, i.e. with the amount of his incomemeasured in wage-units; though when the aggregatevolume of output changes, his real income will (owing