terest. A " fair " rate of profits is such a rate as bears a reasonable relation to the current rate of interest, although this relation of profits to interest rates does not appear to be a strict one. Still, there undoubtedly is some reference to the current rate of interest aa a sort of zero line to which profits should not decline. New investments are made on the basis of current rates of interest and with a view to securing the differential gain promised by the excess of prospective profits over interest rates.
In a period of depression the aggregate industrial equipment is, notoriously, not running at its full capacity ; there are many idle and half-idle plants and many idle workmen. The concerns in question find themselves unable to do a full run of business at reasonable profits. Still, unless the depression is of exceptionally short duration, there is always some new investment going on. More or less of new capital continues to find its way
THE THEORY OF MODERN WELFARE 219
into industrial business in competition with the i concerns that are already in the field.' In case of a protracted depression the aggregate of new investments 80 made may, in the course of years, amount to a very considerable addition to the industrial outfit, and the production of the new establishments may very appreciably increase the aggregate output. Indeed, the output of the new establishments is a notable factor in swelling the supply and keeping down prices. But the new investments made during the depression are profitable, at least at the start. Or even if this should be questioned when stated in this broad way, it will at least hold true that they are commonly entered upon with a weU-advised expectation of their being profitable if the situation does not materially change between the time when the new venture was entered upon and the time when the new equipment has got under way. If the interval between the inception of the new enterprise and its completion is a long one, the situation may so change in the meantime as to leave it