BK. IV

238 THE GENERAL THEORY OF EMPLOYMENT

a greater or smaller scale of output both in the shortand in the long period, but also that any surplus overthe current demand at cost-price can be taken intostock without cost, i.e. that its liquidity-premiumexceeds its carrying-costs (for, otherwise, since thereis no hope of profit from a higher price, the carryingof a stock must necessarily involve a loss). If a com-modity can be found to satisfy these conditions, then,assuredly, it might be set up as a rival to money. Thusit is not logically impossible that there should be acommodity in terms of which the value of output isexpected to be more stable than in terms of money.But it does not seem probable that any such commodityexists.

I conclude, therefore, that the commodity, in termsof which wages are expected to be most sticky, cannotbe one whose elasticity of production is not least, andfor which the excess of carrying-costs over liquidity-premium is not least. In other words, the expectationof a relative stickiness of wages in terms of money isa corollary of the excess of liquidity-premium overcarrying-costs being greater for money than for anyother asset.

Thus we see that the various characteristics, whichcombine to make the money-rate of interest significant,interact with one another in a cumulative fashion. Thefact that money has low elasticities of production andsubstitution and low carrying-costs tends to raisethe expectation that money-wages will be relativelystable; and this expectation enhances money’s liquidity-premium and prevents the exceptional correlationbetween the money-rate of interest and the marginalefficiencies of other assets which might, if it could exist,rob the money-rate of interest of its sting.

Professor Pigou (with others) has been accustomedto assume that there is a presumption in favour of realwages being more stable than money-wages. But thiscould only be the case if there were a presumption in