136 THE GENERAL THEORY OF EMPLOYMENT BK. IV

these marginal efficiencies can then be regarded as themarginal efficiency of capital in general.

The reader should note that the marginal efficiencyof capital is here defined in terms of the expectation ofyield and of the current supply price of the capital-asset.It depends on the rate of return expected to be obtain-able on money if it were invested in a newly producedasset; not on the historical result of what an invest-ment has yielded on its original cost if we look backon its record after its life is over.

If there is an increased investment in any given typeof capital during any period of time, the marginalefficiency of that type of capital will diminish as theinvestment in it is increased, partly because the pro-spective yield will fall as the supply of that type ofcapital is increased, and partly because, as a rule,pressure on the facilities for producing that type ofcapital will cause its supply price to increase; thesecond of these factors being usually the more importantin producing equilibrium in the short run, but thelonger the period in view the more does the first factortake its place. Thus for each type of capital we canbuild up a schedule, showing by how much investmentin it will have to increase within the period, in orderthat its marginal efficiency should fall to any givenfigure. We can then aggregate these schedules forall the different types of capital, so as to provide aschedule relating the rate of aggregate investment tothe corresponding marginal efficiency of capital ingeneral which that rate of investment will establish.We shall call this the investment demand-schedule; or,alternatively, the schedule of the marginal efficiencyof capital.

Now it is obvious that the actual rate of currentinvestment will be pushed to the point where there isno longer any class of capital-asset of which the marginalefficiency exceeds the current rate of interest. In otherwords, the rate of investment will be pushed to the