CH. 10 THE MARGINAL PROPENSITY TO CONSUME 121

place, the increase of employment will tend, owingto the effect of diminishing returns in the short period,to increase the proportion of aggregate income whichaccrues to the entrepreneurs, whose individual marginalpropensity to consume is probably less than the averagefor the community as a whole. In the second place, un-employment is likely to be associated with negative savingin certain quarters, private or public, because the un-employed may be living either on the savings of them-selves and their friends or on public relief which ispartly financed out of loans; with the result thatre-employment will gradually diminish these particularacts of negative saving and reduce, therefore, themarginal propensity to consume more rapidly thanwould have occurred from an equal increase in thecommunity’s real income accruing in different circum-stances.

In any case, the multiplier is likely to be greater fora small net increment of investment than for a large incre-ment; so that, where substantial changes are in view, wemust be guided by the average value of the multiplierbased on the average marginal propensity to consumeover the range in question.

Mr. Kahn has examined the probable quantitativeresult of such factors as these in certain hypotheticalspecial cases. But, clearly, it is not possible to carryany generalisation very far. One can only say, forexample, that a typical modern community would prob-ably tend to consume not much less than 80 per cent,of any increment of real income, if it were a closedsystem with the consumption of the unemployed paidfor by transfers from the consumption of other con-sumers, so that the multiplier after allowing for offsetswould not be much less than 5. In a country,however, where foreign trade accounts for, say, 20 percent, of consumption and where the unemployed receiveout of loans or their equivalent up to, say, 50 per cent, oftheir normal consumption when in work, the multiplier