CH. 24

CONCLUDING NOTES

375

bearing on the future of inequalities of wealth; namely,our theory of the rate of interest. The justification fora moderately high rate of interest has been foundhitherto in the necessity of providing a sufficient in-ducement to save. But we have shown that the extentof effective saving is necessarily determined by thescale of investment and that the scale of investment ispromoted by a low rate of interest, provided that we donot attempt to stimulate it in this way beyond the pointwhich corresponds to full employment. Thus it is toour best advantage to reduce the rate of interest tothat point relatively to the schedule of the marginalefficiency of capital at which there is full employment.

There can be no doubt that this criterion will leadto a much lower rate of interest than has ruled hitherto;and, so far as one can guess at the schedules of themarginal efficiency of capital corresponding to increas-ing amounts of capital, the rate of interest is likely to fallsteadily, if it should be practicable to maintain con-ditions of more or less continuous full employment—unless, indeed, there is an excessive change in theaggregate propensity to consume (including the State).

I feel sure that the demand for capital is strictlylimited in the sense that it would not be difficult toincrease the stock of capital up to a point where itsmarginal efficiency had fallen to a very low figure.This would not mean that the use of capital instru-ments would cost almost nothing, but only that thereturn from them would have to cover little more thantheir exhaustion by wastage and obsolescence togetherwith some margin to cover risk and the exercise ofskill and judgment. In short, the aggregate returnfrom durable goods in the course of their life would, asin the case of short-lived goods, just cover their labour-costs of production plus an allowance for risk and thecosts of skill and supervision.

Now, though this state of affairs would be quitecompatible with some measure of individualism, yet