94 THE GENERAL THEORY OF EMPLOYMENT BK. III

There are not many people who will alter their way ofliving because the rate of interest has fallen from 5 to 4per cent, if their aggregate income is the same as before.Indirectly there may be more effects, though not allin the same direction. Perhaps the most importantinfluence, operating through changes in the rate ofinterest, on the readiness to spend out of a given income,depends on the effect of these changes on the apprecia-tion or depreciation in the price of securities and otherassets. For if a man is enjoying a windfall incrementin the value of his capital, it is natural that his motivestowards current spending should be strengthened, eventhough in terms of income his capital is worth no morethan before; and weakened if he is suffering capitallosses. But this indirect influence we have allowed foralready under (3) above. Apart from this, the mainconclusion suggested by experience is, I think, thatthe short-period influence of the rate of interest onindividual spending out of a given income is secondaryand relatively unimportant, except, perhaps, whereunusually large changes are in question. When therate of interest falls very low indeed, the increase inthe ratio between an annuity purchasable for a givensum and the annual interest on that sum may, however,provide an important source of negative saving byencouraging the practice of providing for old age bythe purchase of an annuity.

The abnormal situation, where the propensity toconsume may be sharply affected by the developmentof extreme uncertainty concerning the future and whatit may bring forth, should also, perhaps, be classifiedunder this heading.

(5) Changes in fiscalpolicy .—In so far as the induce-ment to the individual to save depends on the futurereturn which he expects, it clearly depends not onlyon the rate of interest but on the fiscal policy of theGovernment. Income taxes, especially when theydiscriminate against “unearned” income, taxes on