Re: S=I, an old debate.

["Bruce R. McFarling" <ecbm@xxxxxxxxxxxxxxxxxxx>]

At 00:44 18/08/98 -0700, Chas wrote:

>Dissaving is consumption in excess of current income. You're incorrectly
>assuming I'm dishoarding to consume in excess of income. I'm not. Remember,
>the current hoard was purchased by a prior year's income
>and is part of my current stock of wealth. I am not changing my current
>level of consumption, but I am increasing my current level of spending
>by purchasing, say,  a financial asset.

	No, I am not making any such assumption.  Of course, defining
dissaving as C-Y when C>Y is the natural consequence of defining saving
as Y-C when Y>C.

	So instead of calling the negative of saving "dissaving", I will,
if you prefer, call it negative saving.  Word changes do not change the
argument.

	Defining addition to cash holding as part of someone's saving, and
defining addition to other financial assets as part of someone's saving,
then when someone buys a financial asset out of a hoard, they are not
changing their savinG one iota.  Neither does someone change their
savinG one iota when they buy cash with a financial asset (or, if you
prefer, sell a non-cash financial asset for cash).  Therefore on the
transaction the change in NET savinG over the two parties to the
transaction is 0.

	Defining addition to cash holdings as "neither consumption nor
savinG", and defining drawing down cash holdings as "neither consumption
nor saving", then when someone buys a financial asset out of a hoard,
they are shifting from "neither C nor S" to S.  And the person who sold
the asset is shifting from S to "neither C nor S".  So NET savinG is
still 0.

	Of course, on this list the presumption is that the label
savinG applies to cash holdings as well as other financial assets.
(Keynes, Kalecki, Robinson, et al.)  The question Keynes asked here
was where does savinG come from when it does *not* come from someone
else's saving: that is, since the bulk of individual savinG transactions
are just redistributions of the amount of income received but not
consumed, and has no impact on NET savinG, what is the source of the
"new" savinG in the system that *must* take place if the total level of
savingS is ever going to change.

Aside: Yes, jbod, this flow does have an associated stock; I will go so
far as to agree on the list that when there is a flow one should *think
about* whether there is a stock 8-)#




Virtually,

Bruce McFarling, Newcastle, NSW
ecbm@xxxxxxxxxxxxxxxxxxx