Re: Savings fallacy redux (was Re: Method)

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

Gunnar Tomasson <gunnar.tomasson@xxxxxxxxxxx> wrote,

on Fri, 30 Aug 2002 15:06:14 -0400


> "It would be too ridiculous to go about seriously to prove that

> wealth does not consist in money, or in gold or silver; but

> in what money purchases, and is valuable only for
> purchasing." (Book IV, Ch. 1)


Of course.  This is why it is invalid to conflate financial
wealth and real wealth.  Which implies that seperate terms
are needed for the seperate values.  The GT points out the
connection between finance for EXPENDITURE, the use of
income to finance EXPENDITURE, and the use of income to
accumulate FINANCIAL wealth, that is, the SAVING that takes
place in the period.

There is no point in claiming to have found a "flaw" in
Keynes' reasoning if you first replace the definitions
for the terms used with entirely different definitions.
If in your theory, saving is not a net addition to
financial assets, you are talking about different things.
If you build a model in which some sort of "real" wealth
plays a direct role in the finance of expenditure on
goods and services, you would seem to be falling into
the reverse trap to the one pointed out above: not only
is money not real wealth, incapable of doing the things
that real wealth can do, but real wealth is not money,
incapable of doing the things that money can do.