240 THE GENERAL THEORY OF EMPLOYMENT bk. iv

In such an economy capital equipments will differfrom one another ( a ) in the variety of the consumablesin the production of which they are capable of assisting,

( 'b ) in the stability of value of their output (in the sensein which the value of bread is more stable through timethan the value of fashionable novelties), and (c) in therapidity with which the wealth embodied in them canbecome “liquid”, in the sense of producing output, theproceeds of which can be re-embodied if desired inquite a different form.

The owners of wealth will then weigh the lack of“liquidity” of different capital equipments in the abovesense as a medium in which to hold wealth against thebest available actuarial estimate of their prospectiveyields after allowing for risk. The liquidity-premium,it will be observed, is partly similar to the risk-premium,but partly different;—the difference corresponding tothe difference between the best estimates we can makeof probabilities and the confidence with which we makethem . 1 When we were dealing, in earlier chapters,with the estimation of prospective yield, we did notenter into detail as to how the estimation is made: andto avoid complicating the argument, we did not dis-tinguish differences in liquidity from differences in riskproper. It is evident, however, that in calculating theown-rate of interest we must allow for both.

There is, clearly, no absolute standard of “liquidity”but merely a scale of liquidity—a varying premium ofwhich account has to be taken, in addition to the yieldof use and the carrying-costs, in estimating the com-parative attractions of holding different forms of wealth.The conception of what contributes to “liquidity” is apartly vague one, changing from time to time anddepending on social practices and institutions. Theorder of preference in the minds of owners of wealthin which at any given time they express their feelingsabout liquidity is, however, definite and is all we require

1 Cf. the footnote to p. 148 above.