262 THE GENERAL THEORY OF EMPLOYMENT bk. v

absolutely irrespective of the level of money wages. Atthe best, the date of their disappointment can only bedelayed for the interval during which their own invest-ment in increased working capital is filling the gap.

Thus the reduction in money-wages will have nolasting tendency to increase employment except by virtueof its repercussions either on the propensity to consumefor the community as a whole, or on the schedule ofmarginal efficiencies of capital, or on the rate of interest.There is no method of analysing the effect of a reductionin money-wages, except by following up its possibleeffects on these three factors.

The most important repercussions on these factorsare likely, in practice, to be the following:

(1) A reduction of money-wages will somewhatreduce prices. It will, therefore, involve some re-distribution of real income (a) from wage-earners toother factors entering into marginal prime cost whoseremuneration has not been reduced, and ( b ) from entre-preneurs to rentiers to whom a certain income fixed interms of money has been guaranteed.

What will be the effect of this redistribution on thepropensity to consume for the community as a whole?The transfer from wage-earners to other factors is likelyto diminish the propensity to consume. The effectof the transfer from entrepreneurs to rentiers is moreopen to doubt. But if rentiers represent on the wholethe richer section of the community and those whosestandard of life is least flexible, then the effect of thisalso will be unfavourable. What the net result willbe on a balance of considerations, we can only guess.Probably it is more likely to be adverse than favourable.

(2) If we are dealing with an unclosed system, andthe reduction of money-wages is a reduction relativelyto money-wages abroad when both are reduced to acommon unit, it is evident that the change will befavourable to investment, since it will tend to increasethe balance of trade. This assumes, of course, that the