Editing Interest (section)

====<span id=keynescriticisms>Keynes's criticisms</span>====
In the case of extraordinary spending in time of war the government may wish to borrow more than the public would be willing to lend at a normal interest rate. If the dotted red curve started negative and showed no tendency to increase with ''r'', then the government would be trying to buy what the public was unwilling to sell at any price. Keynes mentions this possibility as a point "which might, perhaps, have warned the classical school that something was wrong" (p.&nbsp;182).

He also remarks (on the same page) that the classical theory does not explain the usual supposition that "an increase in the quantity of money has a tendency to reduce the rate of interest, at any rate in the first instance".

Keynes's diagram of the investment schedule lacks the step shape which can be seen as part of the classical theory. He objects that
<blockquote>the functions used by classical theory... do not furnish material for a theory of the rate of interest; but they could be used to tell us... what the rate of interest will have to be, if the level of employment [which determines income] is maintained at a given figure.<ref>p181.</ref></blockquote>

Later (p.&nbsp;184) Keynes claims that "it involves a circular argument" to construct a theory of interest from the investment schedule since 
<blockquote>the 'marginal efficiency of capital' partly depends on the scale of current investment, and we must already know the rate of interest before we can calculate what this scale will be.</blockquote>