328 THE GENERAL THEORY OF EMPLOYMENT bk. vi

of, say, the previous decade, is, however, more usuallysupported by arguments which have no foundation atall apart from confusion of mind. It flows, in somecases, from the belief that in a boom investment tendsto outrun saving, and that a higher rate of interest willrestore equilibrium by checking investment on the onehand and stimulating savings on the other. Thisimplies that saving and investment can be unequal,and has, therefore, no meaning until these terms havebeen defined in some special sense. Or it is sometimessuggested that the increased saving which accompaniesincreased investment is undesirable and unjust becauseit is, as a rule, also associated with rising prices. Butif this were so, any upward change in the existing levelof output and employment is to be deprecated. Forthe rise in prices is not essentially due to the increasein investment;—it is due to the fact that in the shortperiod supply price usually increases with increasingoutput, on account either of the physical fact of dimin-ishing return or of the tendency of the cost-unit torise in terms of money when output increases. If theconditions were those of constant supply-price, therewould, of course, be no rise of prices; yet, all the same,increased saving would accompany increased invest-ment. It is the increased output which produces theincreased saving; and the rise of prices is merely aby-product of the increased output, which will occurequally if there is no increased saving but, instead, anincreased propensity to consume. No one has a legiti-mate vested interest in being able to buy at priceswhich are only low because output is low.

Or, again, the evil is supposed to creep in if theincreased investment has been promoted by a fall inthe rate of interest engineered by an increase in thequantity of money. Yet there is no special virtue inthe pre-existing rate of interest, and the new moneyis not “forced” on anyone;—it is created in order tosatisfy the increased liquidity-preference which corre-