The General Theory of Employment, Interest & Money (1936)
“Now, we have been accustomed in explaining the ‘crisis’ to lay stress on the rising tendency of the rate of interest under the influence of the increased demand for money both for trade & speculative purposes. At times this factor may certainly play an aggravating &, occasionally perhaps, an initiating part. But I suggest that a more typical, & often the predominant, explanation of the crisis is, not primarily a rise in the rate of interest, but a sudden collapse in the marginal efficiency of capital…that MEC depends, not only on the existing abundance of capital-goods, but also on current expectations as to the future yield of capital-goods. In the case of durable assets it is, therefore, natural & reasonable that expectations of the future should play a dominant part in determining the scale on which new investment is deemed advisable. But as we have seen, the basis for such expectations is very precarious. Being based on shifting & unreliable evidence, they are subject to sudden & violent changes…In conditions of laissez-faire, the avoidance of wide fluctuations in employment may, therefore, prove impossible without far-reaching change in the psychology of investment markets such as there is no reason to expect. I conclude that the duty of ordering the current volume of investment cannot safely be left in private hands.” (Chapter 22, “Notes on the Trade Cycle”).
“Now, though this state of affairs [extremely low rate of profit] would be quite compatible with some measure of individualism [capitalism], yet it would mean the euthanasia of the rentier, &, consequently, the euthanasier of the cumulative oppressive power of the [money] capitalist to exploit the scarcity-value of capital…Interest today rewards no genuine sacrifice any more than does the rent of land. The owner of capital can obtain interest because capital is scarce, just as the owner of land can obtain rent because land is scarce. But whilst there may be intrinsic reasons for the scarcity of land, there are no intrinsic reasons for the scarcity of capital.”