182 THE GENERAL THEORY OF EMPLOYMENT BK. IV

level corresponding to full employment).

The mistake originates from regarding interest asthe reward for waiting as such, instead of as the rewardfor not-hoarding; just as the rates of return on loansor investments involving different degrees of risk, arequite properly regarded as the reward, not of waitingas such, but of running the risk. There is, in truth,no sharp line between these and the so-called “pure”rate of interest, all of them being the reward for runningthe risk of uncertainty of one kind or another. Onlyin the event of money being used solely for transactionsand never as a store of value, would a different theorybecome appropriate .1

There are, however, two familiar points whichmight, perhaps, have warned the classical school thatsomething was wrong. In the first place, it has beenagreed, at any rate since the publication of ProfessorCassel’s Nature and Necessity of Interest , that it isnot certain that the sum saved out of a given incomenecessarily increases when the rate of interest is in-creased; whereas no one doubts that the investmentdemand-schedule falls with a rising rate of interest.But if the Y-curves and the X-curves both fall as therate of interest rises, there is no guarantee that a givenY-curve will intersect a given X-curve anywhere at all.This suggests that it cannot be the Y-curve and theX-curve alone which determine the rate of interest.

In the second place, it has been usual to suppose thatan increase in the quantity of money has a tendency toreduce the rate of interest, at any rate in the first in-stance and in the short period. Yet no reason has beengiven why a change in the quantity of money shouldaffect either the investment demand-schedule or thereadiness to save out of a given income. Thus theclassical school have had quite a different theory of therate of interest in Volume I. dealing with the theoryof value from what they have had in Volume II. dealing1 Cf. Chapter 17 below.