CH. 9 THE PROPENSITY TO CONSUME: II III

same measure as investment. Since incomes will de-crease by a greater absolute amount than investment,it is, indeed, true that, when the rate of interest rises,the rate of consumption will decrease. But this doesnot mean that there will be a wider margin for saving.On the contrary, saving and spending will doth decrease.

Thus, even if it is the case that a rise in the rate ofinterest would cause the community to save more outof a given income, we can be quite sure that a rise in therate of interest(assuming no favourable change inthe demand-schedule for investment) will decrease theactual aggregate of savings. The same line of argu-ment can even tell us by how much a rise in the rate ofinterest will, cet. par., decrease incomes. For incomeswill have to fall(or be redistributed) by just thatamount which is required, with the existing pro-pensity to consume, to decrease savings by the sameamount by which the rise in the rate of interest will,with the existing marginal efficiency of capital, decreaseinvestment. A detailed examination of this aspect willoccupy our next chapter.

The rise in the rate of interest might induce us tosave more, if our incomes were unchanged. But if thehigher rate of interest retards investment, our incomeswill not, and cannot, be unchanged.They mustnecessarily fall, until the declining capacity to save hassufficiently offset the stimulus to save given by thehigher rate of interest. The more virtuous we are, themore determinedly thrifty, the more obstinately orthodoxin our national and personal finance, the more ourincomes will have to fall when interest rises relativelyto the marginal efficiency of capital. Obstinacy canbring only a penalty and no reward. For the resultis inevitable.

Thus, after all, the actual rates of aggregate savingand spending do not depend on Precaution, Foresight,Calculation, Improvement, Independence, Enterprise,Pride or Avarice. Virtue and vice play no part. It all