On 1/30/2014 1:35 PM, James C.W. Ahiakpor wrote:
> Keynes (1930, 1: 172) says saving is "the negative act of refraining from spending the whole of [one's] income on consumption." He also (1936, 74)
> says that saving is merely "the excess of income over what is spent on consumption."  On pages 166-7, Keynes declares that "the rate of interest
> cannot be a return to saving [contrary to classical interest rate theory] or waiting as such [contrary to Marshall's explanation] ... On the contrary
> , ... the rate of interest is the reward for parting with liquidity [i.e. cash] for a specified period."  And you don't interpret any of the above as
> Keynes having included cash hoarding in his understanding or definition of saving? Also see Keynes's /EJ/ articles of 1937 and 1938 claiming that
> savings do not supply investors with the funds they need for investment.  That claim would be logical only if saving meant cash hoarding.


Your first quote is not from the GT, but Keynes specifically clarifies
that in chapter 7 of the GT.  If we want to understand what Keynes meant
by saving, it is beyond me why we would not rely on the GT chapter 6
("The Definition of Income, Saving and Investment") section II
("Saving and Investment"), which you even quote above, along with
the elaborations in chapter 7.  Anything else looks to be tendentious
selective quotation.

You misunderstand Keynes completely on the interest rate.  As I
have pointed out before, you tend to make stock/flow confusions.  When
Keynes says that interest is the reward for parting with liquidity,
he is not talking about gradual changes is asset positions over time
(flows) but about portfolio choices (stocks).  So that has absolutely
nothing to do with "hoarding" (a flow).  Furthermore, as a simple
empirical matter, nothing could be more obvious than that interest
rate fluctuations are better understood in terms of portfolio balance
(stocks) than in terms of investment and saving (flows), so Keynes was
right to switch emphasis in this way.  (Of course he also later
accepted a Hicksian formulation where both stocks and flows matter,
but that does not diminish the insight.)

Finally, as Barkley pointed out, not even Say accepted a crude "Say's Law
of Markets" as a short-run proposition.  Mark Blaug offered a useful discussion:
http://www.jstor.org/stable/40325773
He notes that economists have recognized a distinction between "Say's Law"
and "Say's Identity" at least since Mill.  (However even Blaug's discussion is
not clear enough on the stock-flow issues involved.  Reference to static
general equilibrium models cannot clarify this issue, while even the
simplest continuous-time dynamic model renders it transparent.)  Blaug's
article closes in a way that proves timely: "we in the western world are
faced with Keynesian unemployment, which is indeed due to insufficient
effective demand".

Alan Isaac