Re: General Theory Seminar --Savings and Investment

["William B.Ryan" <william_b_ryan@xxxxxxx>]

Replying to: http://csf.colorado.edu/forums/pkt/2000/msg00602.html

"In equilibrium Y = AE (aggregate spending) = C + I..."

This cannot be correct if Y is defined to be factor income in terms of
cash flow, that is to say, in terms of purchasing power placed into
the hands of final consumers.

[Clifford Poirot]
This definition *must* be true, or you simply disagree with the
terms as defined and understood in common usage among economists. That is to
say, you do not accept standard and conventional forms of national income
accounts. A critique of national income accounting would certainly be
relevant, but I feel that the burden is on you to specify how and why you
develop this critique.
----------

A point of clarification:  I take it from this that you accept that
the statement "Y is defined to be factor income in terms of cash
flow, that is to say, in terms of purchasing power placed into
the hands of final consumers" is correct.

Yes?
----------

[Clifford Poirot]
...To Keynes, equilibrium was a condition where all the incentives
were to continue on.
----------

Whatever that means.  You said before that "in equilibrium" Y = AE, Y
= C + I, S = I, etc.

If, however, investing and saving are actually two totally different
processes, it would be expected that they could never be equal even in
the financial sense, expect by pure chance.  If they are two different
processes, they cannot be countervailing forces within the same
process.  I think it is a fallacy to regard them as such.

I tried to show that in the financial (cash flow) sense the
instantaneous difference between increasing firms sector spending
(which might be termed investment) and the reflux from that spending
is accumulation to debt, not savings.  It is true that difference also
equals accumulation to cash balances.  But if those balances are
needed to conduct day to day transactions between paychecks, for
example, it can hardly be said that they "equal" savings in the sense
that the process of saving is defined in ordinary dictionaries.  It
is simply the mechanical consequence of spending.

There are also accumulating cash balances within the firms sector
itself that must be accounted for, which represent funds that were
never disbursed to consumers.

Keynes did not use ordinary dictionary definitions when he constructed
his page 63 syllogism.

Bill Ryan
william_b_ryan@xxxxxxxxxxx
http://www.geocities.com/CapitolHill/Senate/7018



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