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Date:
Fri Mar 31 17:18:37 2006
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From:
[log in to unmask] (JAMES C. W. AHIAKPOR)
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Ric Holt says:  
 
" 1) It's true that higher savings leads to faster growth, 
but only in the short run. Let's assume that the classical model is 
correct, which Keynes didn't, and that equilibrium in the loanable funds 
market through adjustments of real interest rates leads to investment  
equal to savings. So an increase in savings will lead to an increase 
in investment and spending by firms for new capital. But this will not 
continue indefinitely. Capital wears out and so capital stock will adjust 
itself to the point where savings equal depreciation." 
 
I suggest we come out this muddle.  Saving is a FLOW.  From this flow  
investors acquire the funds to buy capital goods which depreciate,  
physically in the process of production.  That production generates  
new income, part of which is saved and made available for investors  
to continue buying more producer's goods.  Some of such purchases are  
recorded as replacement "capital" or depreciation.  Thus the claim  
that saving is important for growth only in the short run lacks  
validity.   
 
By the way, my own copy of the General Theory has numerous comments on  
the margins and it's "falling apart" from repeated use.  I think I  
know the real Keynes fairly well. 
 
James Ahiakpor 
CSUH, Hayward 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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