Re: General Theory Seminar --Savings and Investment

[Paul Davidson <pdavidson@xxxxxxx>]

At 07:23 PM 02/19/2000 +0900, you wrote:
> Since I found many people participated in exciting discussions about
> Savings and Investment, I would like to ask you a
> question which have bothered me for long time.
>
> In General Theory, Keynes have admitted that saving and investment were
> necessarily equal in amount, as classical
> economists had argued. But in a case of Keynes, the causality was opposite
> to classical economics, in other words,
> saving are an entirely passive variable and always turns out to be equal
> to investment.
>
> Thus, according to Keynes, I seem that saving can't emerge unless
> investment exists. In other words, saving result from
> investment. What I can't understand is whether saving at time t can't be
> funds to invest at time t. I seem that
> arguments about finance motive may prove my correctness, because finance
> motive has nothing to do with saving. Thus
> possible choices to raise funds for investment are (1) bank credit
> expansion (2) past saving accumulated in the form of
> bonds or stock and so on.


If past savings are in the forms of stocks and bonds-- then they are NOT
available as money to meet payrolls in the capital goods producing industry.

If past savings is being currently held as "money" then this is available
to finance new investment -- but only if the public who  holds the money
changes its liquidity preference and agrees to hold securities rather than
money at the current rate of interest.

Paul
Paul Davidson
Holly Chair of Excellence in Political Economy
Editor, JOURNAL OF POST KEYNESIAN ECONOMICS [JPKE]
Economics Department -- 523 SMC
University of Tennessee
Knoxville, Tennessee 37996-0550
email: Pdavidson@xxxxxxx;   phone: (865)974-4221;    fax: (865) 974-4601
http://econ.bus.utk.edu/Davidson.html