Re: D1 and D2

[Bruce McFarling <ecbm@xxxxxxxxxxxxxxxxxxx>]

I must confess that I have been confused by this whole line
of argument.  It seems to me to be confusing the argument
in the terms of the GT and the argument in Mitchell's
National Income accounts leading into  the Samulesonian
presentation and the simple linear consumption and other
functions from the 1950's.

>S and I are different quantities that are unlikely to be
>equal.  There is no logical or practical necessity for them
>to be equal.

If the reference is ACTUALLY to D1 anfd D2, the S&I should
be dropped, since D1 and D2 are defined categorically in the
GT, not as alternate labels for collections of SNA categories.

As far as the simple Keynesian model in the Samuelsonian
vein, I think that this is just a case of shifting terms
from one meaning to another in the process of modelling,
and then pointing out that the meanings have changed.  If
you have a sort of hydraulic model where injections get
pumped in as expenditure, income flows out, and then a
fraction of income received flows back into expenditure,
OF COURSE your "S" as a fraction of income received will be
less than your I, because there will be undistributed
receipts that will, if you freeze the model and do the
accounts, will show up as earned income somewhere, either
as unmet obligations or as *earned* but undistributed
profit.

But as we all know, the simple Y in the simple Samuelsonian
model is in terms of earned income, and undistributed saving,
whether sitting in the account of the owner of a small business
owner or on the bank account owned by a corporation, is actually
added into S on top of (1-c)DY.

As far as the idea of:

>The fallacy in the above is that income does not equal consumption
>plus saving in the financial sense, but equals consumption from
>current income plus consumption from savings plus saving from current
>income, expressed as Y = d1 + d2 + saving

come up with distinct expressions and do not reuse the GT
expressions with different definitions.  D1 and D2 divide
ALL expenditure into that financed out of income and that
financed by other means.  Saving is *all* earned income
not employed to finance expenditure -- whether out of
disposable income or because big bad big gummint has
sequestered it in taxes.  It would be a mistake to confuse
the generic catagories with the illustrations of their
application in a 1930's economy, and then point out that
those illustrations don't fit today's economy very well.
For any general theory, you would expect the specific
applications of the theory in two markedly different
contexts to be ... uhhh ... markedly different.



--
Dr. Bruce R. McFarling, PhD
Bus. Office 1.72 -- (02) 4348-4078
School of Business
Faculty of the Central Coast
Newcastle University, Ourimbah