of expectation which have existed over a certain past period. Nevertheless past expectations, which have not yet worked themselves out, are embodied in to-day's capital equipment... and only influence [the entrepreneur's] decisions in so far as they are so embodied. Chapter 11: Expectation as influencing the schedule of the marginal efficiency of capital The main role of expectation in Keynes's theory lies in the schedule of the marginal efficiency of capital which, as we have seen, is defined in Chapter 11 in terms of expected returns. Keynes differs here from Fisher whom he largely follows, but who defined the 'rate of return over cost' in terms of an actual revenue stream rather than its expectation. The step Keynes took here has a particular significance in his theory. Chapters 14, 18: The schedule of the marginal efficiency of capital as influencing employment Keynes differed from his classical predecessors in assigning a role to the schedule of the marginal efficiency of capital in determining the level of employment. Its effect is mentioned in his presentations of his theory in Chapters 14 and 18 (see above). Chapter 12: Animal spirits Chapter 12 discusses the psychology of speculation and enterprise. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over days to come, can only be taken as a result of animal spirits – of a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantified benefits... Thus if the animal spirits are dimmed and spontaneous optimism falters, leaving us to depend on nothing but a mathematical expectation, enterprise will fade and die. Keynes's picture of the psychology of speculators is less indulgent. In point of fact, all sorts of considerations enter into the market valuation which are in no way relevant to the prospective yield... The recurrence of a bank-holiday may raise the market valuation of the British railway system by several million pounds. (Work in behavioural economics has since empirically supported Keynes' assertion; businesses which are extremely seasonal do indeed see notably higher valuations in the season in question, even if their results are consistent in that quarter from year to year.) Keynes considers speculators to be concerned... ...not with what an investment is really worth to a man who buys it 'for keeps', but with what the market will value it at, under the