THE PROBLEM OF INTEREST 95

of equality with rates on current investments. Where capital
is earning a less rate on its cost than the current investment
rate, risk being duly allowed for as before, opportunity is
afforded for improvement in earnings so far as absence of
keen competition from new investments of capital in the
same line is concerned. If lack of such competition do not
improve the situation, the ultimate abandonment of that
form of investment is only a question of time, and the
abandonment may be hastened by the competition of new
forms of capital competing to supply the same product.
The value of the old investment is destroyed in such a case,
more or less completely. Thus there is a tendency for
actual earnings to gravitate towards the level expressed by
the interest rate, Earnings must, in this case, be understood
as the earnings on the marginal supply of capital of any
particular form, and, as competition tends to direct new
supplies of capital to occupations where the marginal
return is above the interest rate, it tends to make the
marginal return in every line gravitate towards that rate,
and to make that rate express the earning power, not merely
of marginal supplies of particular instrumental goods, but
of marginal supplies of capital in general.
Some reference may be made to the contention which is
advanced that saving is in danger of becoming excessive.
If there is justice in the contentions of our general discussion,
it must be admitted that an automatic adjustment takes
place between saving and the opportunities for employing
capital profitably. Investors may be unwilling to accept a
reduction of the earnings of their capital. In choosing the
alternative of a more risky investment at a hoped-for higher
return, in place of a less risky investment at a lower
anticipated return, they do not avoid the reduction of net
teturn. They merely decide to disregard the conservative
valuation of the risks, and to set a lower value on them, and
thus leave a higher value for their estimate of the net out of
a given gross return. Experience will inevitably show what
has occurred if the increase of capital have really reduced
the net marginal return. There are abundant opportunities
for the employment of capital in rendering useful services to