148 THE GENERAL THEORY OF EMPLOYMENT BK. IVlatter as being the state of long-term expectation;—asdistinguished from the short-term expectation uponthe basis of which a producer estimates what he willget for a product when it is finished if he decides tobegin producing it to-day with the existing plant,which we examined in Chapter 5.

II

It would be foolish, in forming our expectations, toattach great weight to matters which are very uncertain.It is reasonable, therefore, to be guided to a considerabledegree by the facts about which we feel somewhatconfident, even though they may be less decisivelyrelevant to the issue than other facts about which ourknowledge is vague and scanty. For this reason thefacts of the existing situation enter, in a sense dis-proportionately, into the formation of our long-termexpectations; our usual practice being to take theexisting situation and to project it into the future,modified only to the extent that we have more or lessdefinite reasons for expecting a change.

The state of long-term expectation, upon which ourdecisions are based, does not solely depend, therefore,on the most probable forecast we can make. It alsodepends on the confidence with which we make thisforecast—on how highly we rate the likelihood of ourbest forecast turning out quite wrong. If we expectlarge changes but are very uncertain as to what pre-cise form these changes will take, then our confidencewill be weak.

The state of confidence, as they term it, is a matterto which practical men always pay the closest and mostanxious attention. But economists have not analysedit carefully and have been content, as a rule, to discuss

1 By“ very uncertain” I do not mean the same thing as“ very im-probable”. Cf. my Treatise on Probability, chap. 6, on“The Weight ofArguments”.