138 THE GENERAL THEORY OF EMPLOYMENT BK. IV

find a clear statement of what economists have usuallyintended by these terms.

There are at least three ambiguities to clear up.There is, to begin with, the ambiguity whether we areconcerned with the increment of physical product perunit of time due to the employment of one more physicalunit of capital, or with the increment of value due to theemployment of one more value unit of capital. Theformer involves difficulties as to the definition of thephysical unit of capital, which I believe to be bothinsoluble and unnecessary. It is, of course, possible tosay that ten labourers will raise more wheat from a givenarea when they are in a position to make use of certainadditional machines; but I know no means of reducingthis to an intelligible arithmetical ratio which does notbring in values. Nevertheless many discussions of thissubject seem to be mainly concerned with the physicalproductivity of capital in some sense, though the writersfail to make themselves clear.

Secondly, there is the question whether the marginalefficiency of capital is some absolute quantity or a ratio.The contexts in which it is used and the practice oftreating it as being of the same dimension as the rate ofinterest seem to require that it should be a ratio. Yetit is not usually made clear what the two terms of theratio are supposed to be.

Finally, there is the distinction, the neglect of whichhas been the main cause of confusion and misunder-standing, between the increment of value obtainable byusing an additional quantity of capital in the existingsituation, and the series of increments which it isexpected to obtain over the whole life of the additionalcapital asset;—i.e, the distinction between Q1 and thecomplete series Q1, Q2 . . . Qr . . . This involvesthe whole question of the place of expectation ineconomic theory. Most discussions of the marginalefficiency of capital seem to pay no attention to anymember of the series except Q1. Yet this cannot be