174 THE GENERAL THEORY OF EMPLOYMENT BK. IV

and the quantity of money. This treatment, however,involved a confusion between results due to a changein the rate of interest and those due to a change in theschedule of the marginal efficiency of capital, which Ihope I have here avoided.

V

The concept of Hoarding may be regarded as a firstapproximation to the concept of Liquidity-preference.Indeed if we were to substitute “propensity to hoard”for “hoarding”, it would come to substantially the samething. But if we mean by “hoarding” an actualincrease in cash-holding, it is an incomplete idea—andseriously misleading if it causes us to think of “hoard-ing” and “not-hoarding” as simple alternatives. Forthe decision to hoard is not taken absolutely or withoutregard to the advantages offered for parting withliquidity;—it results from a balancing of advantages,and we have, therefore, to know what lies in the otherscale. Moreover it is impossible for the actual amountof hoarding to change as a result of decisions on thepart of the public, so long as we mean by “hoarding”the actual holding of cash. For the amount of hoardingmust be equal to the quantity of money (or—on somedefinitions—to the quantity of money minus what isrequired to satisfy the transactions-motive); and thequantity of money is not determined by the public.All that the propensity of the public towards hoardingcan achieve is to determine the rate of interest at whichthe aggregate desire to hoard becomes equal to theavailable cash. The habit of overlooking the relationof the rate of interest to hoarding may be a part of theexplanation why interest has been usually regarded asthe reward of not-spending, whereas in fact it is thereward of not-hoarding.