Re: clarification re Larsson's points

["John B. O'Donnell" <jackodonnell@xxxxxxxx>]

Gregoire de Nowell (ci-devant) wrote:

<<SNIP>>

> Whether or not it is objectively "true" is a more
> difficult matter.  Savings rates in the U.S. have
> been declining even as aggregate income has increased.
> So there may be a hole in the GT or there may be some
> other explanation (I suspect foreign investment may
> be involved).  But I'm not offering an explanation here
> and would even appreciate illumination on this point.
>
> (Doug Henwood has raised it before, but I don't recall
> anyone giving him an answer)

I can't say it is a hole in the GT or simply an alternate
explanation. I find the common errors of expecting "savings" to
be equated with "investment" leading to aggregate income are:

1) Equating savings to investment is rationally derived from the
tautological assignment of things first made more valuable by
human effort [i.e. - produced] but not immediately made less
valuable [i.e. - consumed] and therefore retained as investment.

2) Savings are then measured as money put aside rather than spent
and investment is measured by purchases of tooling, inventory and
stuff expected to last extended periods of time such as housing.

3) The simple explanation of deviation of savings and income lies
in the difference of that which is and that which is measured. I
suspect that much investment and saving occurs without ever
becoming a measurable exchange. On the investment side this
includes such things as internal tool making by the user of the
tool and "sale / lease" of capital by direct financing of the
makers of capital equipment that escape measurement as capital.
On the saving side it would include such non measured components
as income / wealth accumulation as increases in home price above
simple inflation and unrealized paper profits from securities
investments.

4) In short, I suspect the "hole" is a disconnect among that
which is defined as savings and investment; that which is
measured as such; and that which is connotatively meant by the
labels.

This is just another example of the consequences of an over
emphasis on creating a complex description [i.e. - theory] to fit
the workings of the world and taking the Gordian Knot approach by
simply cutting to the core and identifying the things that can be
done [i.e. - those items that can be used as controls]; the
measures by which they can be evaluated; and, ignore things which
are beyond control while they remain beyond control.

In the words of an anonymous philosopher -- "The only way to eat
an elephant is one bite at a time."

Note: You may want to look at this posting from Per. He has
apparently been using a measure of wealth accumulation that could
overcome the "savings" discrepancy I speak to above:

Subject: Re: Does Debt Matter
Date: Thu, 30 Oct 1997 13:42:25 +0100
From: "Per Gunnar Berglund" <pgb@xxxxxxxxxxxxxxxxxx>
Reply-To: pkt@xxxxxxxxxxxxxxxx
To: POST-KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>


			-- jbod
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