Mathew Forstater, quoting Keynes: 
> 
>"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). 
> 
Ahhh yes, a true classic (no pun intended).  One problem with Keynes' 
view is that he does not distinguish between the various forms that 
savings might take.  The quote is fine (the first half) if savings is 
interpreted to mean holding cash (or more precisely outside money). 
If the saving is taking place by individuals holding more bank liabili- 
ties (and this need not be intentional, it can be due to refraining 
from spending, or being unable to do so), it relinquishes control over 
resources to the banks who can then turn it into funds for investment. 
The seems to refute the general tone of Keynes' argument. 
 
In my view, no imaginable economic system can promise that an act of 
saving today will constitute demand for a specific good in the future. 
The best we can hope for is that at least in the aggregate today's 
savings are tomorrow's consumption.  To the extent that such savings 
takes place through bank intermediation, Keynes' problem is at least 
partially addressed.  As to getting the specifics right, we rely on the 
microeconomic process to do the job. 
 
One other comment... the "investment-leads-savings" view must assume 
that there are idle resources (as Keynes appears to in The GT).  The 
question then is why resources are idle.  The assumption cannot re- 
appear as a conclusion. 
 
Steve Horwitz 
St. Lawrence University 
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