CH. 22

NOTES ON THE TRADE CYCLE

325

or speculative, and to a long-term rate of interestwhich seldom or never falls below a conventional level,these schools of thought are, as guides to practicalpolicy, undoubtedly in the right. For in such condi-tions there is no other means of raising the averagelevel of employment to a more satisfactory level. Ifit is impracticable materially to increase investment,obviously there is no means of securing a higher levelof employment except by increasing consumption.

Practically I only differ from these schools of thoughtin thinking that they may lay a little too much emphasison increased consumption at a time when there is stillmuch social advantage to be obtained from increasedinvestment. Theoretically, however, they are open tothe criticism of neglecting the fact that there are twoways to expand output. Even if we were to decidethat it would be better to increase capital more slowlyand to concentrate effort on increasing consumption, wemust decide this with open eyes after well consideringthe alternative. I am myself impressed by the greatsocial advantages of increasing the stock of capitaluntil it ceases to be scarce. But this is a practicaljudgment, not a theoretical imperative.

Moreover, I should readily concede that the wisestcourse is to advance on both fronts at once. Whilstaiming at a socially controlled rate of investment witha view to a progressive decline in the marginal efficiencyof capital, I should support at the same time all sortsof policies for increasing the propensity to consume.For it is unlikely that full employment can be main-tained, whatever we may do about investment, withthe existing propensity to consume. There is room,therefore, for both policies to operate together;—topromote investment and, at the same time, to promoteconsumption, not merely to the level which with theexisting propensity to consume would correspond tothe increased investment, but to a higher level still.

If—to take round figures for the purpose of illus-