THE ROLE OF INVESTMENT IN THE MODERN ECONOMY
IN earlier chapters we have considered the special role of private investment as a dynamic factor controlling the rise and fall of income. We have explained that, by and large, consumption plays a passive role, rising and falling according as income rises and falls. Thus, in a noninterventionist society full reliance, in effect, has to be placed upon private investment as the means to secure full employment.
Private consumption, except for minor qualifications, is determined by the level of private income, and can, therefore, not play a dynamic, active role in securing full employment. If consumption is to play such a role, supplementing the active role of private investment, it is necessary to invoke the aid of government. Community consumption expenditures, or publicly financed private consumption expenditures (such as relief for the unemployed), need not be conditioned by the level of currently received private income. Thus, through government action, consumption can be made to play an active, dynamic role in income creation.
In this chapter, however, we are particularly concerned with the role of private investment. In the past it was almost exclusively private investment which called the tune and rang the changes in the movement of the cycle. Even public expenditures, whether for public investment or for