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PART

are also divided in a certain proportion betweenexpenditure on the purchase of consumption-goods and savings. Now if the first proportionis larger than the second, producers of con-sumption-goods will lose money; for their saleproceeds, which are equal to the expenditure ofthe public on consumption-goods, will be less(as a little thought will show) than what thesegoods have cost them to produce. If, on theother hand, the second proportion is larger thanthe first, then the producers of consumption-goods will make exceptional gains. It followsthat the profits of the producers of consumption-goods can only be restored, either by the publicspending a larger proportion of their incomeson such goods (which means saving less), or bya larger proportion of production taking theform of capital-goods (since this means asmaller proportionate output of consumption-goods).

But capital-goods will not be produced on alarger scale unless the producers of such goodsare making a profit. So we come to our secondquestion—upon what do the profits of theproducers of capital-goods depend? They de-pend on whether the public prefer to keep theirsavings liquid in the shape of money or itsequivalent or to use them to buy capital-goodsor the equivalent. If the public are reluctantto buy the latter, then the producers of capital-goods will make a loss; consequently lesscapital-goods will be produced; with the resultthat, for the reasons given above, producers of