Page:The Economics of Unemployment.djvu/55

at any given time has been produced within the current year, a check upon the rate of new supply will be rapidly effective. But when the year's new supply is, say, no more than 5 per cent, of the aggregate supply, a reduction in the rate of new supply will operate very slowly as a check upon excess. Now this is normally the case with the supply of industrial capital. A year's saving furnishes but a small percentage of the total in use,^[1] and a check that operates not upon the whole, but only on the new supply, cannot be expected to be a speedy or effective one.

There is a second reason why this check is slow and ineffective. As regards a large proportion of the saving that takes place for investment, the rate of interest is either not a regulative motive at all or is not of any considerable importance. The great bulk of what I call automatic saving will scarcely be affected by a fall in the rate of interest except in so far as this reduces the aggregate unearned incomes. Some sort of conscious thrift, aiming to make a definite provision of income for old age or other future contingency, may even be stimulated, instead of depressed, by a falling rate of interest which demands a larger volume of saving to yield the required income. Some other forms of saving considered in the aggregate—such as national and municipal improvements—are positively stimulated by lower rates of interest at which capital can be borrowed, to be repaid, silently and automatically, by sinking funds. So, likewise, practically the whole of the rapidly increasing accumu-