When there is a disequilibrium between savings and investment, this is much more often due to fluctuations in the rate of investment than to sudden changes in the rate of savings, which is, in normal circumstances, of a fairly steady character. To understand, therefore, the genesis and the severity of the disequilibria which we have analysed in volume I, it is chiefly necessary to consider what causes the rate of investment to fluctuate and to estimate the order of magnitude of such fluctuations. In this chapter and the two following, we shall treat in turn the causes and the degree of fluctuations of investment in fixed capital, working capital and liquid capital. These chapters are in the nature of a digression, which is doubtfully in place in a treatise on money but has to be included because the fluctuations in the rate of investment have not been treated, sufficiently for my purpose, elsewhere.

In the case of fixed capital it is easy to understand why fluctuations should occur in the rate of investment. Entrepreneurs are induced to embark on the production of fixed capital or deterred from doing so by their expectations of the profit to be made. Apart from the many minor reasons why these should fluctuate in a changing world, Professor Schumpeter's explanation of the major movements may be unreservedly accepted. He points to