Ric, when you say that:
> If a nation does have a high savings rate then certain benefits are
>shifted to future generations.
are you speaking of the neoclasical view? The first thing that pops to
mind is the famous first few pages of chapter 16 of the _General Theory_:
"An act of individual saving means- so to speak- a decision not to have
dinner today. But it does _not_ necessitate a decision to have dinner or
to buy a pair of boots a week hence or a year hence or to consume any
specified thing at any specified date. Thus it depresses the business of
preparing to-day's dinner without stimulating the business of making ready
for some future act of consumption. It is not a substitution of future
consumption-demand for present consumption-demand, -it is a net dimunition
of such demand. Moreover, the expectation of future consumption is so
largely based on present consumption that a reduction in the latter is
likely to depress the former, with the result that the act of saving...may
reduce present invstment-demand as well as present consumption-demand...In
any case...an individual decision to save does not, in actual fact, involve
the placing of any specific forward order for consumption, but merely the
cancellation of a present order." (1964[1936]: 210-11).
There's more good stuff there, with words like 'absurd', 'specious' and
'fallacy' used to describe the idea that "current investment is promoted by
individual saving to the same extent as present consumption is diminished",
but my fingertips are starting to hurt.
By the way, since this passage is squarely in Book IV, we may have to
reconsider using the respective lengths of Books III and IV in determining
the relative importance of consumption and investment for Keynes. :)
I agree that investment is the independent variable, it's "where the action
is" in Keynes, and Keynes's ideas on investment and money and uncertainty
of expectations have been ignored and diluted and misrepresented and
misunderstood in the mainstream and textbook presentations, but consumption
is still important for Keynes's theory. Keynes's consumption theory plays
a role in the principle of effective demand, the multiplier concept, his
critique of the neoclassical theory of savings, etc. Stability of
consumption patterns (as opposed to volatility and unreliability of
investment) should not be taken to mean unimportant. Isn't consumption
theory integral to the notion that investment determines savings through
changes in the level of income, as opposed to savings determining
investment through variations in the rate of interest?
___________________________________
Mathew Forstater Department of Economics
Gettysburg College Gettysburg, PA 17325
tel: (717) 337-6668 fax: (717) 337-6251 e-mail: [log in to unmask]
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