Page:The Economics of Unemployment.djvu/40

siderations, that any approximation towards equality of incomes would reduce the proportion of income saved to income spent. At a time like the present, when the aggregate amount of saving is greatly reduced, it is natural that qualms should be felt as to the effect of any movements making for a greater equalisation of incomes, and a consequent reduction of the automatic savings from high incomes. Under such circumstances my thesis, that under-consumption due to oversaving arising from maldistribution of income, is the normal cause of cyclical depression, is liable to grave misunderstanding.

I hasten, therefore, to explain that the over-saving of which I speak refers solely to the proportion of saving to spending, and does not imply any fixed limit to the amount that can be serviceably saved. This thesis may be presented in the following form:

Just as waste of productive power admittedly occurs by misapplication of capital, skill, and labour, as between one trade and another, or one area of investment and another (too much applied here, too little there), so income as a whole may be wastefully applied as between purchase of commodities and purchase of new capital goods.

For just as it is clear that waste ensues unless some accurate proportion is kept between the amounts of capital, skill, and labour placed in the several productive processes required for converting raw materials into finished goods, so there is waste if these finished goods are not effectively demanded and consumed as fast as the productive processes enable them to pass into the form of finished goods. In other words,