320 THE GENERAL THEORY OF EMPLOYMENT bk. vi

practicable reduction in the rate of interest. Thuswith markets organised and influenced as they are atpresent, the market estimation of the marginal efficiencyof capital may suffer such enormously wide fluctuationsthat it cannot be sufficiently offset by correspondingfluctuations in the rate of interest. Moreover, the cor-responding movements in the stock-market may, as wehave seen above, depress the propensity to consumejust when it is most needed. In conditions of laissez-faire the avoidance of wide fluctuations in employmentmay, therefore, prove impossible without a far-reachingchange in the psychology of investment markets suchas there is no reason to expect. I conclude that the dutyof ordering the current volume of investment cannotsafely be left in private hands.

hi

The preceding analysis may appear to be in con-formity with the view of those who hold that over-investment is the characteristic of the boom, that theavoidance of this over-investment is the only possibleremedy for the ensuing slump, and that, whilst for thereasons given above the slump cannot be prevented bya low rate of interest, nevertheless the boom can beavoided by a high rate of interest. There is, indeed,force in the argument that a high rate of interest ismuch more effective against a boom than a low rateof interest against a slump.

To infer these conclusions from the above would,however, misinterpret my analysis; and would, accord-ing to my way of thinking, involve serious error. Forthe term over-investment is ambiguous. It may referto investments which are destined to disappoint theexpectations which prompted them or for which thereis no use in conditions of severe unemployment, or it mayindicate a state of affairs where every kind of capital-goods is so abundant that there is no new investment