WEBVTT NOTE 8. Income, Saving and Investment 1 00:00:00.000 --> 00:00:10.000 Chapter 8, Income, Saving and Investment 2 00:00:10.000 --> 00:00:15.000 Confusing Definitions 3 00:00:15.000 --> 00:00:21.000 Chapter 6, The Definition of Income, Saving and Investment 4 00:00:21.000 --> 00:00:32.000 and Chapter 7, The Meaning of Saving and Investment Further Considered, are among the most confused that even Keynes ever wrote, 5 00:00:32.000 --> 00:00:39.000 and upon their confusions are built some of the major fallacies in the general theory. 6 00:00:39.000 --> 00:00:45.000 Let us start with a sentence on page 55. 7 00:00:45.000 --> 00:00:56.000 Furthermore, the effective demand is simply the aggregate income or proceeds which the entrepreneurs expect to receive. 8 00:00:56.000 --> 00:01:01.000 This is loose writing, loose thinking, or both. 9 00:01:01.000 --> 00:01:11.000 Surely the effective demand cannot be what the entrepreneurs expect to receive, but what they do, in fact, receive. 10 00:01:11.000 --> 00:01:19.000 What they expect to receive must be merely what they expect the effective demand to be. 11 00:01:19.000 --> 00:01:28.000 This confusion between expectations and realities, as we shall see, runs throughout the general theory. 12 00:01:28.000 --> 00:01:40.000 Yet many Keynesians single out his treatment of expectations as Keynes's great contribution to or even revolution in economics. 13 00:01:40.000 --> 00:01:54.000 This process of bringing anticipations out from between the lines, writes Albert G. Hart, is nowhere more dramatically illustrated than in the work of Keynes. 14 00:01:54.000 --> 00:02:05.000 Keynes himself confesses that in his treatise on money he did not distinguish clearly between expected and realized results. 15 00:02:05.000 --> 00:02:21.480 The Aggregate Demand Function relates various hypothetical quantities of employment to the 16 00:02:21.480 --> 00:02:26.960 proceeds which their outputs are expected to yield, and the effective demand is the 17 00:02:26.960 --> 00:02:33.420 point on the aggregate demand function which becomes effective because, taken in conjunction 18 00:02:33.420 --> 00:03:01.420 Particularly as he has not bothered up to this point to explain some of the leading terms employed, this is as choice a specimen of involution and technical gobbledygook as one is likely to find anywhere. 19 00:03:01.420 --> 00:03:08.140 But the general theory is rich in such jewels, and we shall have occasion to examine the 20 00:03:08.140 --> 00:03:12.860 multiple facets of many of them before we are through. 21 00:03:12.860 --> 00:03:20.780 I spare the reader footnote 2 on page 55, which weaves mathematical equations into already 22 00:03:20.780 --> 00:03:27.540 intricate verbal crochet work, but the curious may wish to consult it. 23 00:03:27.540 --> 00:03:36.580 We are now ready to proceed to Keynes's definitions, respectively, of income, saving and investment, 24 00:03:36.580 --> 00:03:43.360 and of his reasons for finding saving and investment always equal. 25 00:03:43.360 --> 00:03:49.560 But before we do this, I must call attention to Keynes's apology for the considerable 26 00:03:49.560 --> 00:03:57.520 confusion, page 61, he caused in his treatise on money by his use of the terms there and 27 00:03:57.520 --> 00:04:08.520 and to his confession, page 78, that the exposition in My Treatise on Money is, of course, very confusing and incomplete. 28 00:04:08.520 --> 00:04:18.520 It remains now to examine which is the more confusing, Keynes's exposition and use of the terms in his Treatise on Money 29 00:04:18.520 --> 00:04:24.520 or his exposition and use of the terms in the General Theory. 30 00:04:24.520 --> 00:04:31.680 If Keynes gives any simple definition of national income in chapters six and seven, I cannot 31 00:04:31.680 --> 00:04:33.320 find it. 32 00:04:33.320 --> 00:04:40.640 As we shall see, his concept of income seems to be subject to change without notice. 33 00:04:40.640 --> 00:04:47.380 I am willing to accept Professor Hanson's word for it that income in the current period 34 00:04:47.380 --> 00:04:54.440 is defined by Keynes as equal to current investment plus current consumption expenditures. 35 00:04:54.440 --> 00:05:03.440 Saving in the current period is, moreover, defined as equal to current income minus current consumption. 36 00:05:03.440 --> 00:05:09.940 Each of these key words, it will be noticed, is here defined in terms of the others. 37 00:05:09.940 --> 00:05:15.940 Such definitions are merely circular, and not in themselves enlightening. 38 00:05:15.940 --> 00:05:28.340 If we are told that x equals y plus z, then of course we know that y equals x minus z, and that z equals x minus y. 39 00:05:28.340 --> 00:05:40.580 Furthermore, if we know that x equals y plus z, and that x also equals y plus w, we know that w equals z. 40 00:05:40.580 --> 00:05:47.200 But none of these transpositions or deductions can advance us very much until we have further 41 00:05:47.200 --> 00:05:52.940 knowledge of W, X, Y or Z. 42 00:05:52.940 --> 00:05:59.500 There are two chief questions to be asked concerning the use of terms and their definitions. 43 00:05:59.500 --> 00:06:00.700 1. 44 00:06:00.700 --> 00:06:05.340 Is a given term and its definition clear and consistent? 45 00:06:05.340 --> 00:06:06.580 2. 46 00:06:06.580 --> 00:06:13.300 Is a given set of terms or definitions more useful or enlightening than a more traditional 47 00:06:13.300 --> 00:06:17.020 set or than possible alternatives. 48 00:06:17.020 --> 00:06:20.020 Let us now apply these two tests. 49 00:06:20.020 --> 00:06:28.700 Amidst the welter of divergent usages of terms, writes Keynes on page 61, it is agreeable 50 00:06:28.700 --> 00:06:31.340 to discover one fixed point. 51 00:06:31.340 --> 00:06:37.420 So far as I know, everyone has agreed that saving means the excess of income over expenditure 52 00:06:37.420 --> 00:06:40.420 on consumption. 53 00:06:40.420 --> 00:06:47.100 This definition, while at first sight apparently both simple and clear, ignores the vagueness 54 00:06:47.100 --> 00:06:51.060 in both the terms saving and income. 55 00:06:51.060 --> 00:06:57.700 Either of these may be conceived in terms of commodities, or purely in terms of money, 56 00:06:57.700 --> 00:07:01.940 Or in terms of a mixture of commodities and money. 57 00:07:01.940 --> 00:07:09.220 If an automobile dealer, for example, takes 100 cars from a manufacturer in a given year, 58 00:07:09.220 --> 00:07:17.060 and sells only 75 of them, the 25 cars that he has been unable to get rid of may be regarded 59 00:07:17.060 --> 00:07:23.860 by some economists as part of his income during that year, and part of his savings during 60 00:07:23.860 --> 00:07:25.620 that year. 61 00:07:25.620 --> 00:07:32.820 He himself, however, may measure his income and savings purely in terms of his cash position, 62 00:07:32.820 --> 00:07:37.740 and regard his unsold cars as a mere misfortune. 63 00:07:37.740 --> 00:07:44.460 They will probably be carried on his books at cost or at some other arbitrary valuation, 64 00:07:44.460 --> 00:07:50.700 but the dealer will only measure his income and savings in accordance with the money price 65 00:07:50.700 --> 00:07:55.240 at which his surplus cars are ultimately unloaded. 66 00:07:55.240 --> 00:07:59.940 We shall return to some of these points later. 67 00:07:59.940 --> 00:08:05.980 Why Savings Equals Investment 68 00:08:05.980 --> 00:08:12.180 Our definition of income, continues Keynes, also leads us at once to the definition of 69 00:08:12.180 --> 00:08:18.860 current investment, for we must mean by this the current addition to the value of the capital 70 00:08:18.860 --> 00:08:24.420 equipment which has resulted from the productive activity of the period. 71 00:08:24.420 --> 00:08:31.060 This is, clearly, equal to what we have just defined as saving, for it is that part of 72 00:08:31.060 --> 00:08:36.020 the income of the period which has not passed into consumption. 73 00:08:36.020 --> 00:08:41.580 Page 62 Now, it is to be noticed here that Keynes 74 00:08:41.580 --> 00:08:48.420 has not only defined investment so that it is necessarily equal to saving, but he has 75 00:08:48.420 --> 00:08:54.700 has also defined it that investment and saving must be identical. 76 00:08:54.700 --> 00:09:00.940 He does not admit this clearly, however, until 12 pages later, at the beginning of chapter 77 00:09:00.940 --> 00:09:02.740 7. 78 00:09:02.740 --> 00:09:08.740 In the previous chapter, saving and investment have been so defined that they are necessarily 79 00:09:08.740 --> 00:09:15.020 equal in amount, being, for the community as a whole, merely different aspects of the 80 00:09:15.020 --> 00:09:16.780 same thing. 81 00:09:16.780 --> 00:09:18.720 page 74. 82 00:09:18.720 --> 00:09:25.200 But before he gets to this admission of identity, he has already made and expanded upon his 83 00:09:25.200 --> 00:09:28.540 contention of equality. 84 00:09:28.540 --> 00:09:34.540 Whilst therefore the amount of saving is an outcome of the collective behavior of individual 85 00:09:34.540 --> 00:09:41.900 consumers and the amount of investment of the collective behavior of individual entrepreneurs, 86 00:09:41.900 --> 00:09:47.940 These two amounts are necessarily equal, since each of them is equal to the excess of income 87 00:09:47.940 --> 00:09:49.820 over consumption. 88 00:09:49.820 --> 00:09:55.840 Provided it is agreed that income is equal to the value of current output, that current 89 00:09:55.840 --> 00:10:02.500 investment is equal to the value of that part of current output which is not consumed, and 90 00:10:02.500 --> 00:10:09.220 that saving is equal to the excess of income over consumption, the equality of saving and 91 00:10:09.220 --> 00:10:18.100 And investment necessarily follows. In short, income equals value of output equals consumption 92 00:10:18.100 --> 00:10:29.020 plus investment. Saving equals income minus consumption. Therefore, saving equals investment. 93 00:10:29.020 --> 00:10:35.060 Page 63 Now, if, following the symbols used by the 94 00:10:35.060 --> 00:10:43.860 With Keynesians, we let income be called Y, consumption C, investment I, and saving S. 95 00:10:43.860 --> 00:10:47.460 We arrive at the famous formulas. 96 00:10:47.460 --> 00:10:58.940 Y equals I plus C. S equals Y minus C. Therefore, I equals S. 97 00:10:58.940 --> 00:11:04.860 All this is undeniable, provided we define these terms and symbols as Keynes in this 98 00:11:04.860 --> 00:11:07.440 chapter defines them. 99 00:11:07.440 --> 00:11:13.220 We cannot say that this use of these terms or these definitions are wrong. 100 00:11:13.220 --> 00:11:21.580 If Keynes in fact had explicitly defined both saving and investment as meaning simply, unconsumed 101 00:11:21.580 --> 00:11:28.900 and output, which he never did do, then not only the equality but the identity of saving 102 00:11:28.900 --> 00:11:32.460 and investment would have been obvious. 103 00:11:32.460 --> 00:11:40.940 But while, to repeat, no usage or definition of words can be arbitrarily dismissed as wrong, 104 00:11:40.940 --> 00:11:44.540 we may properly ask some questions of it. 105 00:11:44.540 --> 00:11:51.180 Is it in accordance with common usage, or does it depart so much from common usage as 106 00:11:51.180 --> 00:12:06.100 Does it help or hinder study of the problems involved? Is it precise or vague? And finally, 107 00:12:06.100 --> 00:12:13.500 is it used or applied consistently? We shall find, in fact, that Keynes's definition of 108 00:12:13.500 --> 00:12:20.880 saving and investment, which make them necessarily equal and, indeed, merely different aspects 109 00:12:20.880 --> 00:12:28.080 Books of the Same Thing, page 74, have created great embarrassments for the Keynesians and 110 00:12:28.080 --> 00:12:32.000 confusions and contradictions in the Master. 111 00:12:32.000 --> 00:12:37.480 The embarrassments to the Keynesians come not only from the fact that Keynes had previously 112 00:12:37.480 --> 00:12:45.520 so defined saving and investment as to make them usually unequal or occasionally equal 113 00:12:45.520 --> 00:12:53.320 only by a sort of happy accident, but from the fact that these general theory definitions 114 00:12:53.320 --> 00:12:58.360 create many difficulties in subsequent Keynesian doctrines. 115 00:12:58.360 --> 00:13:04.160 In fact, Keynes abandons these definitions without notice to the reader in the latter 116 00:13:04.160 --> 00:13:09.600 part of the general theory and returns to his older concepts. 117 00:13:09.600 --> 00:13:17.680 I have already referred to the apologies of one or two lines that Keynes makes, pages 74 118 00:13:17.680 --> 00:13:25.940 and 78 in the General Theory, for the very confusing and incomplete definitions and exposition 119 00:13:25.940 --> 00:13:28.440 in his treatise on money. 120 00:13:28.440 --> 00:13:34.720 What he fails to point out, however, is that his whole concept of the terms is different, 121 00:13:34.720 --> 00:13:40.000 and that his whole theory of the relation of saving and investment has been radically 122 00:13:40.000 --> 00:13:41.000 changed. 123 00:13:41.000 --> 00:13:47.920 We do not have to do here with any mere differences in definition or in exposition. 124 00:13:47.920 --> 00:13:54.520 We have to do with the abandonment and repudiation of one of the major theories presented in 125 00:13:54.520 --> 00:13:57.440 the treatise on money. 126 00:13:57.440 --> 00:14:02.940 For in that treatise, Keynes explains the whole credit cycle in terms of differences 127 00:14:02.940 --> 00:14:17.940 We shall mean by savings, he writes, the sum of the differences between the money incomes of individuals and their money expenditure on current consumption. 128 00:14:17.940 --> 00:14:26.940 It is to be noticed here that he defines savings specifically in terms of money incomes and expenditures. 129 00:14:26.940 --> 00:14:37.940 In his general theory definitions, however, money is not explicitly mentioned either in defining savings or in defining investment. 130 00:14:37.940 --> 00:14:42.940 Keynes does declare, in defining investment in the general theory, 131 00:14:42.940 --> 00:14:54.940 Investment, thus defined, includes, therefore, the increment of capital equipment, whether it consists of fixed capital, working capital, or liquid capital. 132 00:14:54.940 --> 00:14:57.940 Page 75. He then adds, 133 00:14:57.940 --> 00:15:06.940 The significant differences of definition are due to the exclusion of investment of one or more of these categories. 134 00:15:06.940 --> 00:15:08.940 Page 75. 135 00:15:08.940 --> 00:15:20.940 Keynes's definition of investment quoted in the general theory therefore includes liquid capital, by which he apparently means both money and securities. 136 00:15:20.940 --> 00:15:33.940 But it surely merely adds confusion to call cash, for example, a part of capital equipment. This confuses Keynes himself as he proceeds. 137 00:15:33.940 --> 00:15:43.940 Let us return to his use of the terms saving and investment and the theory he builds around this use in his Treatise on Money. 138 00:15:43.940 --> 00:15:51.940 Keynes there explains the whole credit cycle in terms of saving running ahead of investment or vice versa. 139 00:15:51.940 --> 00:16:09.940 On my theory, he writes, it is a large volume of saving which does not lead to a correspondingly large volume of investment, not one which does, which is the root of the trouble. 140 00:16:09.940 --> 00:16:14.940 A hundred pages later on, he is even more explicit. 141 00:16:14.940 --> 00:16:21.260 It is not surprising that saving and investment should often fail to keep step. 142 00:16:21.260 --> 00:16:27.020 In the first place, as we have mentioned already, decisions which determine saving and investment 143 00:16:27.020 --> 00:16:32.860 respectively are taken by two different sets of people influenced by different sets of 144 00:16:32.860 --> 00:16:37.940 motives, each not paying very much attention to the other. 145 00:16:37.940 --> 00:16:41.380 And he adds, in the same paragraph, 146 00:16:41.380 --> 00:16:48.300 There is indeed no possibility of intelligent foresight designed to equate savings and investment 147 00:16:48.300 --> 00:16:52.820 unless it is exercised by the banking system. 148 00:16:52.820 --> 00:16:58.080 And at the end of the chapter, it gives the reader to understand that this difference 149 00:16:58.080 --> 00:17:05.020 in effect describes the genesis and life history of the credit cycle. 150 00:17:05.020 --> 00:17:11.260 The distinction between saving and investment is, if anything, even more sharply drawn 151 00:17:11.260 --> 00:17:31.260 This saving relates to units of money and is the sum of the differences between the money incomes of individuals and their money expenditure in current consumption, and investment relates to units of goods. 152 00:17:31.260 --> 00:17:39.260 The object of this chapter is to illustrate further the significance of the distinction between these two savings. 153 00:17:39.260 --> 00:17:51.260 Saving is the act of the individual consumer and consists in the negative act of refraining from spending the whole of his current income on consumption. 154 00:17:51.260 --> 00:18:02.260 Investment, on the other hand, is the act of the entrepreneur whose function it is to make the decisions which determine the amount of the non-available output 155 00:18:02.260 --> 00:18:11.760 and consists in the positive act of starting or maintaining some process of production or of withholding liquid goods. 156 00:18:11.760 --> 00:18:20.760 It is measured by the net addition to wealth, whether in the form of fixed capital, working capital or liquid capital. 157 00:18:20.760 --> 00:18:45.760 It is significant that though Keynes here defines saving explicitly in terms of units of money and investment explicitly in terms of units of goods, he then surreptitiously or absentmindedly introduces the element of money and investment under the term liquid capital. 158 00:18:45.760 --> 00:18:51.760 Small wonder that he himself later found the whole thing very confusing. 159 00:18:51.760 --> 00:18:58.760 It may be pointed out here that in the general theory, Keynes constantly uses a word like income 160 00:18:58.760 --> 00:19:04.760 without specifying or distinguishing between real income and money income. 161 00:19:04.760 --> 00:19:07.760 This leads to constant confusion. 162 00:19:07.760 --> 00:19:27.760 And as we shall see, when we do distinguish constantly and clearly between real income and money income, such plausibility as the Keynesian theories may have begins to wear off. His system needs this ambiguity and confusion. 163 00:19:27.760 --> 00:19:31.760 Saving as the Villain 164 00:19:31.760 --> 00:19:38.480 It will be noticed also that in the very terms of his definitions in the treatise on money, 165 00:19:38.480 --> 00:19:43.900 Keynes manages to disparage saving while commending investment. 166 00:19:43.900 --> 00:19:49.880 The truth is that saving has always been the villain in the Keynesian melodrama. 167 00:19:49.880 --> 00:19:56.680 As far back as The Economic Consequences of the Peace, 1920, the book that first brought 168 00:19:56.680 --> 00:20:18.680 The Railways of the World which the 19th century built as a monument to posterity were, not less than the pyramids of Egypt, the work of labor which was not free to consume in immediate enjoyment the full equivalent of its efforts. 169 00:20:18.680 --> 00:20:24.680 Thus this remarkable system depended for its growth on a double bluff of deception. 170 00:20:24.680 --> 00:20:31.960 On the one hand, the laboring classes accepted from ignorance or powerlessness, or were compelled, 171 00:20:31.960 --> 00:20:38.040 persuaded, or cajoled by custom, convention, authority, and the well-established order 172 00:20:38.040 --> 00:20:44.220 of society into accepting, a situation in which they could call their own very little 173 00:20:44.220 --> 00:20:50.700 of the cake that they and nature and the capitalists were cooperating to produce. 174 00:20:50.700 --> 00:20:55.300 And on the other hand the capitalist classes were allowed to call the best part of the 175 00:20:55.300 --> 00:21:01.620 cake theirs, and were theoretically free to consume it, on the tacit underlying condition 176 00:21:01.620 --> 00:21:05.460 that they consumed very little of it in practice. 177 00:21:05.460 --> 00:21:11.900 The duty of saving became nine-tenths of virtue, and the growth of the cake the object of true 178 00:21:11.900 --> 00:21:13.380 religion. 179 00:21:13.380 --> 00:21:19.100 There grew round the non-consumption of the cake all those instincts of Puritanism, which 180 00:21:19.100 --> 00:21:25.060 which in other ages has withdrawn itself from the world and has neglected the arts of production 181 00:21:25.060 --> 00:21:27.360 as well as those of enjoyment. 182 00:21:27.360 --> 00:21:33.940 And so the cake increased, but to what end was not clearly contemplated? 183 00:21:33.940 --> 00:21:39.820 Individuals would be exhorted not so much to abstain as to defer, and to cultivate the 184 00:21:39.820 --> 00:21:43.880 pleasures of security and anticipation. 185 00:21:43.880 --> 00:21:49.880 Banking was for old age or for your children, but this was only in theory. 186 00:21:49.880 --> 00:21:55.960 The virtue of the cake was that it was never to be consumed, neither by you nor by your 187 00:21:55.960 --> 00:21:58.440 children after you. 188 00:21:58.440 --> 00:22:01.200 Pages 19-20 189 00:22:01.200 --> 00:22:07.280 This is a typical example of the satire and prose style of the Bloomsbury School, of which 190 00:22:07.280 --> 00:22:12.280 in which Keynes was a prominent member, along with Leiden Strache. 191 00:22:12.280 --> 00:22:16.280 But it cannot be taken seriously as economics. 192 00:22:16.280 --> 00:22:21.280 Its main purpose is obviously be la parterre les bourgeois. 193 00:22:21.280 --> 00:22:28.280 It illustrates the frivolity and irresponsibility which are recurrent in Keynes's work. 194 00:22:28.280 --> 00:22:36.280 It is obviously absurd, for example, to say that labor was not free to consume in immediate enjoyment 195 00:22:36.280 --> 00:22:51.280 It was the capitalists who were doing the saving. The workers saved only to the extent that their incomes permitted and their own voluntary prudence prescribed. 196 00:22:51.280 --> 00:23:03.280 Labor then, as now, was getting the full amount of its marginal contribution to the value of the product. There was no bluff and no deception. 197 00:23:03.280 --> 00:23:10.280 As a result of this saving, the size of the cake, it is true, was growing practically every year. 198 00:23:10.280 --> 00:23:15.280 But more cake was also being consumed practically every year. 199 00:23:15.280 --> 00:23:21.280 I have tried to illustrate what was happening in my economics in one lesson. 200 00:23:21.280 --> 00:23:29.280 As a result of annual saving and investment, total annual production increased each year. 201 00:23:29.280 --> 00:23:52.280 Ignoring the irregularities caused by short-term fluctuations and assuming for the sake of mathematical simplicity, an annual increase in production of 2.5 percentage points, the picture that we would get for an 11-year period, say, would run something like this in terms of index numbers. 202 00:23:52.280 --> 00:24:04.280 In the first year, total production would be 100. Consumers' goods produced would be 80. Capital goods produced would be 20. 203 00:24:04.280 --> 00:24:12.280 This, of course, assumed the process of saving and investment to have been already underway at the same rate. 204 00:24:12.280 --> 00:24:27.280 In the second year, total production would be 102.5. Consumers' goods produced would be 82. Capital goods produced would be 20.5. 205 00:24:27.280 --> 00:24:39.280 In the third year, total production would be 105. Consumers' goods produced would be 84. Capital goods produced would be 21. 206 00:24:39.280 --> 00:24:54.280 In the fourth year, total production would be 107.5. Consumers' goods produced would be 86. Capital goods produced would be 21.5. 207 00:24:54.280 --> 00:25:07.280 In the fifth year, total production would be 110. Consumers' goods produced would be 88. Capital goods produced would be 22. 208 00:25:07.280 --> 00:25:13.280 In the sixth year, total production would be 112.5. 209 00:25:13.280 --> 00:25:16.280 Consumers' goods produced would be 90. 210 00:25:16.280 --> 00:25:21.280 Capital goods produced would be 22.5. 211 00:25:21.280 --> 00:25:26.280 In the seventh year, total production would be 115. 212 00:25:26.280 --> 00:25:30.280 Consumers' goods produced would be 92. 213 00:25:30.280 --> 00:25:34.280 Capital goods produced would be 23. 214 00:25:34.280 --> 00:25:40.280 In the eighth year, total production would be 117.5. 215 00:25:40.280 --> 00:25:44.280 Consumers' goods produced would be 94. 216 00:25:44.280 --> 00:25:49.280 Capital goods produced would be 23.5. 217 00:25:49.280 --> 00:25:54.280 In the ninth year, total production would be 120. 218 00:25:54.280 --> 00:25:58.280 Consumers' goods produced would be 96. 219 00:25:58.280 --> 00:26:02.280 Capital goods produced would be 24. 220 00:26:02.280 --> 00:26:08.280 In the 10th year, total production would be 122.5. 221 00:26:08.280 --> 00:26:12.280 Consumers' goods produced would be 98. 222 00:26:12.280 --> 00:26:16.280 Capital goods produced would be 24.5. 223 00:26:16.280 --> 00:26:22.280 And in the 11th year, total production would be 125. 224 00:26:22.280 --> 00:26:26.280 Consumers' goods produced would be 100. 225 00:26:26.280 --> 00:26:30.280 Capital goods produced would be 25. 226 00:26:30.280 --> 00:26:41.280 What I tried to illustrate by this table is that total production increased each year because of the saving and would not have increased without it. 227 00:26:41.280 --> 00:26:55.280 The saving was used year after year to increase the quantity or improve the quality of existing machinery and other capital equipment, and so to increase the output of goods. 228 00:26:55.280 --> 00:26:59.280 There was a larger and larger cake each year. 229 00:26:59.280 --> 00:27:05.280 Each year, it is true, not all of the currently produced cake was consumed, 230 00:27:05.280 --> 00:27:10.280 but there was no irrational or cumulative consumer constraint. 231 00:27:10.280 --> 00:27:16.280 For each year a larger and larger cake was in fact consumed, 232 00:27:16.280 --> 00:27:20.280 until at the end of the eleventh year, in our illustration, 233 00:27:20.280 --> 00:27:28.280 The annual consumer's cake alone was equal to the combined consumer's and producer's cakes of the first year. 234 00:27:29.280 --> 00:27:38.280 Moreover, the capital equipment, the ability to produce goods, was itself 25% greater than in the first year. 235 00:27:39.280 --> 00:27:46.280 My illustration, of course, assumed the long-run equality and identity of saving and investment. 236 00:27:46.280 --> 00:28:08.280 Now, it is a notorious fact that in the 19th century, which Keynes is here deriding, there was not only continuous saving and a tremendous increase in capital equipment, but a huge increase in population and a constant increase in the living standards of that population. 237 00:28:08.280 --> 00:28:18.280 Keynes himself, in fact, in the succeeding paragraph of the Economic Consequences took the whole thing back. 238 00:28:18.280 --> 00:28:21.280 He was just having his little joke. 239 00:28:21.280 --> 00:28:27.280 But the problem is to know, even in his treatise on money and in his general theory, 240 00:28:27.280 --> 00:28:33.280 when he is just having his little joke and when he is really in earnest. 241 00:28:33.280 --> 00:28:39.720 I suspect that he himself was sometimes a little confused on this point. 242 00:28:39.720 --> 00:28:46.280 Benjamin M. Anderson, indeed, has suggested that Keynes's confusion on the whole concept 243 00:28:46.280 --> 00:28:53.380 of savings and investment in the general theory could be interpreted as due to an effort to 244 00:28:53.380 --> 00:28:56.920 carry out a puckish joke on the Keynesians. 245 00:28:56.920 --> 00:29:02.320 He had gotten them excited in his earlier writings about the relation between savings 246 00:29:02.320 --> 00:29:30.840 Keynes has certainly given his followers a great deal of embarrassment and trouble. 247 00:29:30.840 --> 00:29:39.200 Alvin H. Hansen, in his Guide to Keynes, tries manfully to save Keynes from himself. 248 00:29:39.200 --> 00:29:44.760 One source of confusion arose from the failure of his critics to realize that while investment 249 00:29:44.760 --> 00:29:50.360 and saving are always equal, they are not always in equilibrium. 250 00:29:50.360 --> 00:29:55.120 All this could have been avoided if Keynes had made it clear from the outset that the 251 00:29:55.120 --> 00:30:01.480 The equality of saving an investment does not mean that they are necessarily in equilibrium. 252 00:30:01.480 --> 00:30:03.920 Page 59 253 00:30:03.920 --> 00:30:10.520 They can be equal but not in equilibrium, Hansen goes on to suggest, if there is a lag 254 00:30:10.520 --> 00:30:14.640 or lagged adjustment of some kind. 255 00:30:14.640 --> 00:30:18.800 I confess myself unable to follow this argument. 256 00:30:18.800 --> 00:30:25.100 It seems to me a self-contradiction, for it seems to assume that because of a lag in adjustment 257 00:30:25.100 --> 00:30:30.100 Savings and investment are not always equal. 258 00:30:30.100 --> 00:30:36.100 Paul A. Samuelson tries to save Keynes from himself by suggesting that 259 00:30:36.100 --> 00:30:42.100 the attempt to save may lower income and actually realized saving. 260 00:30:42.100 --> 00:30:48.100 On the other hand, a net autonomous increase in investment, foreign bonds, 261 00:30:48.100 --> 00:31:15.100 I do not know how far it is intentional and how far unintentional humor when Samuelson suggests that the obscurities and contradictions of the general theory are an embarrassment for the anti-Keynesians rather than for the Keynesians. 262 00:31:15.100 --> 00:31:19.100 But he actually writes, as I have previously quoted, 263 00:31:19.100 --> 00:31:29.100 It bears repeating that the general theory is an obscure book, so that would-be anti-Keynesians must assume their position largely on credit, 264 00:31:29.100 --> 00:31:36.900 unless they are willing to put in a great deal of work, and run the risk of seduction in the process. 265 00:31:36.900 --> 00:31:40.700 Keynesian Paradoxes 266 00:31:40.700 --> 00:31:47.180 As we shall now see, however, Samuelson's suggested escape from the Keynesian saving 267 00:31:47.180 --> 00:31:54.220 investment dilemma corresponds closely with the exit that Keynes himself tries to take. 268 00:31:54.220 --> 00:31:59.620 But this only lands Keynes into more confusions and contradictions. 269 00:31:59.620 --> 00:32:06.020 There are so many of these, in fact, that it would be tedious and unprofitable to attempt 270 00:32:06.020 --> 00:32:09.420 to point out more than a few. 271 00:32:09.420 --> 00:32:15.740 Mises argues at times, as we have seen, that saving and investment are not always equal, 272 00:32:15.740 --> 00:32:23.740 but merely different aspects of the same thing, yet he still keeps to his old habit of deploring 273 00:32:23.740 --> 00:32:27.180 saving while approving investment. 274 00:32:27.180 --> 00:32:34.640 So he must argue that saving reduces income and investment increases income, though they 275 00:32:34.640 --> 00:32:41.920 They Are Necessarily Equal in Amount, and Merely Different Aspects of the Same Thing, 276 00:32:41.920 --> 00:32:44.200 page 74. 277 00:32:44.200 --> 00:32:50.600 From here on I find it impossible to follow his distinctions, oscillations, reverses, 278 00:32:50.600 --> 00:32:52.480 and contradictions. 279 00:32:52.480 --> 00:33:00.440 In a long section, pages 81 through 85, we are told The prevalence of the idea that saving 280 00:33:00.440 --> 00:33:06.020 Having an investment taken in their straightforward sense can differ from one another is to be 281 00:33:06.020 --> 00:33:09.780 explained I think by an optical illusion. 282 00:33:09.780 --> 00:33:15.020 Page 81 There follows a long explanation of the two-sided 283 00:33:15.020 --> 00:33:19.600 nature of an individual depositor's relation to his bank. 284 00:33:19.600 --> 00:33:26.240 Then, the newfangled view that there can be saving without investment or investment without 285 00:33:26.240 --> 00:33:32.640 Without Genuine Saving, page 83, is described as erroneous. 286 00:33:32.640 --> 00:33:38.860 The error lies in proceeding to the plausible inference that when an individual saves he 287 00:33:38.860 --> 00:33:43.220 will increase aggregate investment by an equal amount. 288 00:33:43.220 --> 00:33:49.500 It is true that when an individual saves he increases his own wealth, but the conclusion 289 00:33:49.500 --> 00:33:55.880 that he also increases aggregate wealth fails to allow for the possibility that an act of 290 00:33:55.880 --> 00:34:02.520 If individual saving may react on someone else's savings and hence on someone else's wealth 291 00:34:02.520 --> 00:34:07.160 – pages 83 through 84. 292 00:34:07.160 --> 00:34:14.680 From this it somehow follows that it is impossible for all individuals simultaneously to save 293 00:34:14.680 --> 00:34:17.120 any given sums. 294 00:34:17.120 --> 00:34:23.520 Every such attempt to save more by reducing consumption will so affect incomes that the 295 00:34:23.520 --> 00:34:29.020 The Attempt Necessarily Defeats Itself, page 84. 296 00:34:29.020 --> 00:34:35.280 In sum, we are apparently to understand that while saving and investment are necessarily 297 00:34:35.280 --> 00:34:42.780 equal and merely different aspects of the same thing, yet saving reduces employment 298 00:34:42.780 --> 00:34:49.420 and incomes, and investment increases employment and incomes. 299 00:34:49.420 --> 00:34:55.020 There is still another Keynesian paradox of savings, though they are necessarily equal 300 00:34:55.020 --> 00:35:00.900 to investment and merely different aspects of the same thing. 301 00:35:00.900 --> 00:35:06.300 Though an individual whose transactions are small in relation to the market can safely 302 00:35:06.300 --> 00:35:13.140 neglect the fact that demand is not a one-sided transaction, it makes nonsense to neglect 303 00:35:13.140 --> 00:35:16.660 it when we come to aggregate demand. 304 00:35:16.660 --> 00:35:22.260 This is the vital difference between the theory of the economic behavior of the aggregate 305 00:35:22.260 --> 00:35:29.060 and the theory of the behavior of the individual unit, in which we assume that changes in the 306 00:35:29.060 --> 00:35:32.780 individual's own demand do not affect his income. 307 00:35:32.780 --> 00:35:38.700 Page 85 The only way in which we can make any sense 308 00:35:38.700 --> 00:35:44.980 whatever of this whole otherwise baffling passage is to assume that when Keynes uses 309 00:35:44.980 --> 00:35:51.980 When he uses the word saving, he is thinking merely of the negative act of not buying consumption goods. 310 00:35:51.980 --> 00:35:59.980 But when he uses the word investment, he is thinking merely of the positive act of buying capital goods. 311 00:35:59.980 --> 00:36:05.980 And he falls into this primary error because he forgets his own previous insistence 312 00:36:05.980 --> 00:36:14.980 that saving and investment are necessarily equal and merely different aspects of the same thing. 313 00:36:14.980 --> 00:36:21.980 He is in fact thinking in each case of only one side of the transaction. 314 00:36:21.980 --> 00:36:27.980 Saving equals merely the negative act of not buying consumption goods. 315 00:36:27.980 --> 00:36:33.980 Investment equals merely the positive act of buying or making capital goods. 316 00:36:33.980 --> 00:36:41.980 Yet, these two acts are both parts of the same act. The first is necessary for the second. 317 00:36:41.980 --> 00:36:46.980 An analogous thing happens in the realm of consumption goods alone. 318 00:36:46.980 --> 00:36:51.980 A man's tastes change, and he switches from chicken to lamb. 319 00:36:51.980 --> 00:37:00.980 We don't scold him at one moment for hurting the poultry-raisers, and praise him at the next for aiding the sheep-raisers. 320 00:37:00.980 --> 00:37:06.980 We recognize that his purchasing power has gone in one direction rather than another, 321 00:37:06.980 --> 00:37:13.980 and that if he had not given up the chicken, he would not have had the money to buy the lamb. 322 00:37:13.980 --> 00:37:21.980 Unless a man refrains from spending all his money on consumption goods, i.e., unless he saves, 323 00:37:21.980 --> 00:37:29.980 he will not have the funds to buy investment goods, or to lend to others to buy investment goods. 324 00:37:29.980 --> 00:37:36.880 If I may anticipate here my own later argument and conclusions, there cannot be a given amount 325 00:37:36.880 --> 00:37:44.220 of real net investment in a community without an equal amount of real net saving. 326 00:37:44.220 --> 00:37:51.400 When we are talking in real terms, net saving and net investment are not only equal, but 327 00:37:51.400 --> 00:37:54.380 saving is investment. 328 00:37:54.380 --> 00:38:00.300 When we are talking in monetary terms, however, the problem is more complicated. 329 00:38:00.300 --> 00:38:07.780 In monetary terms, today's saving is not necessarily tomorrow's investment, and today's investment 330 00:38:07.780 --> 00:38:11.500 is not necessarily yesterday's saving. 331 00:38:11.500 --> 00:38:18.040 But this is because the money supply may have contracted or expanded in the meanwhile. 332 00:38:18.040 --> 00:38:24.260 To return to Keynes's reasoning, Keynes has himself become entangled in the sort of naive 333 00:38:24.260 --> 00:38:31.380 and one-sided interpretation of the two terms, saving and investment, that so often trips 334 00:38:31.380 --> 00:38:36.380 up the man in the street when he talks of economic problems. 335 00:38:36.380 --> 00:38:40.220 We get some confirmation of this when Keynes writes, 336 00:38:40.220 --> 00:38:46.940 In the aggregate, the excess of income over consumption, which we call saving, cannot 337 00:38:46.940 --> 00:38:52.420 differ from the addition to capital equipment, which we call investment. 338 00:38:52.420 --> 00:39:00.100 Saving in fact is a mere residual. The decisions to consume and the decisions to invest between 339 00:39:00.100 --> 00:39:06.460 them determines incomes. Page 64 340 00:39:06.460 --> 00:39:13.820 Why savings should be a mere residual, whatever that may mean, I cannot say. But the sentence 341 00:39:13.820 --> 00:39:20.860 I have put in italics reveals the undercurrent of Keynes's thinking. It is not production 342 00:39:20.860 --> 00:39:28.060 that determines incomes, it is not work that determines incomes, it is the decisions to 343 00:39:28.060 --> 00:39:32.140 consume and the decisions to invest. 344 00:39:32.140 --> 00:39:38.820 It may be hard to imagine Robinson Crusoe as a Keynesian, but if he had been when he 345 00:39:38.820 --> 00:39:44.420 returned to England and the reporters had interviewed him at the pier, the results might 346 00:39:44.420 --> 00:39:47.540 have run something like this. 347 00:39:47.540 --> 00:39:53.660 How do you account for your big income when on the island? the reporters might have asked. 348 00:39:53.660 --> 00:40:00.260 Very simple, Crusoe would have replied. I decided to consume an awful lot. And what 349 00:40:00.260 --> 00:40:07.340 I didn't consume, I decided to invest. And as a result, of course, my income grew and 350 00:40:07.340 --> 00:40:09.580 grew. 351 00:40:09.580 --> 00:40:14.440 Wasn't your income determined by what you produced? one puzzled reporter might have 352 00:40:14.440 --> 00:40:16.440 would have asked. 353 00:40:16.440 --> 00:40:17.440 Produced? 354 00:40:17.440 --> 00:40:18.440 Worked? 355 00:40:18.440 --> 00:40:21.440 Robinson Crusoe Keynes would have replied. 356 00:40:21.440 --> 00:40:22.440 What nonsense! 357 00:40:22.440 --> 00:40:25.440 We have changed all that. 358 00:40:25.440 --> 00:40:27.440 What we have in this sentence, 359 00:40:27.440 --> 00:40:33.440 the decisions to consume and the decisions to invest between them determine income, 360 00:40:33.440 --> 00:40:39.440 is in fact a typical example of Keynes's inveterate habit of describing causation 361 00:40:39.440 --> 00:40:44.620 not only from an arbitrary point, but rear-end foremost. 362 00:40:44.620 --> 00:40:50.880 It is true, of course, that in economic life, cause and effect are continuous and endlessly 363 00:40:50.880 --> 00:40:54.120 recurrent as in the chain of life. 364 00:40:54.120 --> 00:41:00.000 This is the truth expressed paradoxically in Samuel Butler's definition. 365 00:41:00.000 --> 00:41:05.320 A hen is only an egg's way of making another egg. 366 00:41:05.320 --> 00:41:13.080 Now this statement is not untrue, philosophically speaking, but it is confusing to common sense. 367 00:41:13.080 --> 00:41:19.600 For practical purposes, say for a poultry-raiser or someone in the egg business, it is more 368 00:41:19.600 --> 00:41:24.120 useful to look at the subject from the hen's point of view. 369 00:41:24.120 --> 00:41:30.880 So while Keynes's method of treating consumption as a cause of production and income cannot 370 00:41:30.880 --> 00:41:40.880 may not be called entirely erroneous, it is certainly misleading and in fact disastrous as the major premise for public policy. 371 00:41:40.880 --> 00:41:50.880 The orthodox and perhaps stodgy view that work and production are the primary cause of incomes and make consumption possible 372 00:41:50.880 --> 00:42:05.880 can be found far more useful in the long run, and far less likely to lead to the intoxicating assumption that prosperity and full employment can be made perpetual through government spending and the printing press. 373 00:42:11.880 --> 00:42:19.880 Before leaving this subject, it may be useful to explore a little further the possible sources of Keynes's confusions. 374 00:42:20.880 --> 00:42:27.760 He has told us that saving and investment are necessarily equal in amount, being, for 375 00:42:27.760 --> 00:42:32.880 the community as a whole, merely different aspects of the same thing. 376 00:42:32.880 --> 00:42:34.240 Page 74. 377 00:42:34.240 --> 00:42:41.080 Eleven pages later, he tells us that certain propositions follow merely from the fact that 378 00:42:41.080 --> 00:42:46.400 there cannot be a buyer without a seller, or a seller without a buyer. 379 00:42:46.400 --> 00:42:48.280 Page 85. 380 00:42:48.280 --> 00:42:49.840 This is a truism. 381 00:42:49.840 --> 00:42:56.500 Yet, Keynes does well to state it explicitly, for it is astonishing how often it is forgotten 382 00:42:56.500 --> 00:43:01.640 by economists, by journalists and by practical men. 383 00:43:01.640 --> 00:43:07.400 On a day when the stock market has had an unusual rise, one will see such headlines 384 00:43:07.400 --> 00:43:10.860 as, two million shares bought. 385 00:43:10.860 --> 00:43:16.800 When it has had an unusual fall, the headlines are likely to read instead, three million 386 00:43:16.800 --> 00:43:19.000 shares sold. 387 00:43:19.000 --> 00:43:29.000 In the first case, 2 million shares must have been sold, and in the second case, 3 million shares must have been bought. 388 00:43:29.000 --> 00:43:41.000 In the first case, public attention was fixed by the rise on the buying, whereas in the second case, public attention was fixed by the fall on the selling. 389 00:43:41.000 --> 00:43:55.000 The difference is not, as journalists often carelessly or foolishly imply or state, that in the first case there was more buying than selling, or in the second, more selling than buying. 390 00:43:55.000 --> 00:44:05.000 In both cases, buying and selling had to be equal. No doubt there was a difference in the relative urgency of the buying and selling. 391 00:44:05.000 --> 00:44:16.000 To put the matter in another and more generalized form, there was a change in the valuation that both buyers and sellers put on shares. 392 00:44:16.000 --> 00:44:27.000 A rising market, in other words, is a sign not only that buyers are willing to bid more than on the day before, but that sellers insist on getting more. 393 00:44:27.000 --> 00:44:31.000 The converse is true as regards a falling market. 394 00:44:31.000 --> 00:44:54.000 If we assume that, in the general theory, Keynes is trying to apply the analogy of selling and buying to saving and investment, the saver being the one who puts aside the cash and the investor the one who borrows it or uses it to buy raw materials or capital equipment, we encounter certain difficulties. 395 00:44:54.000 --> 00:45:03.000 In the first place, the saver and the investor on these definitions may often be the same person. 396 00:45:03.000 --> 00:45:12.000 This is not true, except perhaps occasionally for certain technical bookkeeping purposes of the buyer and seller. 397 00:45:12.000 --> 00:45:17.000 It may often be difficult even for an individual entrepreneur 398 00:45:17.000 --> 00:45:29.000 Nor, when he uses part of his net income to buy additional raw materials or capital equipment, to distinguish between his saving and his investment. 399 00:45:29.000 --> 00:45:40.000 They are both part of the same act. They are the same act. For he cannot buy the raw materials unless he has the money to buy them. 400 00:45:40.000 --> 00:45:46.000 And if he does buy them, he does not have that money to buy goods for his own consumption. 401 00:45:46.000 --> 00:45:57.000 But we get very little help from Keynes, even in the Treatise on Money, and learning precisely where to draw the line between savings and investment. 402 00:45:57.000 --> 00:46:06.000 If the reader will turn back, for example, to page 84 and to the quotation there from chapter 12 of the Treatise on Money, 403 00:46:06.000 --> 00:46:12.000 he will find that the respective definitions are at once nebulous and biased. 404 00:46:12.000 --> 00:46:21.000 Saving, we are told, is the act of the individual consumer, whereas investment is the act of the entrepreneur. 405 00:46:21.000 --> 00:46:29.000 Now the definition of an act, one would suppose, would be expressed solely in terms of the act itself, 406 00:46:29.000 --> 00:46:33.000 without the irrelevant introduction of who does it. 407 00:46:33.000 --> 00:46:43.000 When an individual consumer saves, we are apparently to understand, he merely negatively refrains from spending. 408 00:46:43.000 --> 00:46:51.000 Yet it should be obvious that he also, necessarily, invests in cash or bank deposits. 409 00:46:51.000 --> 00:46:58.000 When an entrepreneur invests, he is, according to Keynes, doing something positive, 410 00:46:58.000 --> 00:47:11.200 even if it is only adding to his liquid capital, i.e. doing precisely the same thing as the naughty consumer who is merely refraining from spending all his income. 411 00:47:11.200 --> 00:47:15.400 It is impossible to make sense of the Keynesian definitions, 412 00:47:15.400 --> 00:47:27.400 But let us, in spite of Keynes's own confusions, persist with his apparently intended analogy of the relationship of saving and investment to that of selling and buying. 413 00:47:27.400 --> 00:47:38.400 If buying and selling are merely two sides of the same act, then it is obviously silly to treat buying as virtuous and selling as wicked. 414 00:47:38.400 --> 00:47:54.400 It is no less silly to treat investing as virtuous and saving as sinful, or to argue, as Keynes does, that saving reduces income and employment, while investing increases them. 415 00:47:54.400 --> 00:48:01.400 If everybody tried to sell something and nobody bought it, there would simply be no sales. 416 00:48:01.400 --> 00:48:11.400 If there were suddenly greater urgency to sell than to buy, the practical result would be either an un-reduced volume of sales at lower prices, 417 00:48:11.400 --> 00:48:21.400 or a somewhat reduced volume of sales at lower prices, depending on the relative willingness to buy and on other factors. 418 00:48:21.400 --> 00:48:35.400 Similarly with saving and investment. When there is greater relative urgency to save than to invest, then the volume of saving and investment may be lower than formerly. 419 00:48:35.400 --> 00:48:39.400 In any case, interest rates will tend to fall. 420 00:48:39.400 --> 00:48:49.400 But it does not follow that the decline of the urgency to invest in anything other than cash or short-term securities is wicked, 421 00:48:49.400 --> 00:48:54.400 or itself the basic cause of unemployment and depression. 422 00:48:54.400 --> 00:49:02.400 It is much more profitable to ask what it is that has caused the decreased urgency to invest. 423 00:49:02.400 --> 00:49:07.960 But we are getting ahead of our present point, which has to do chiefly with the conception 424 00:49:07.960 --> 00:49:13.280 and definition respectively of saving and investment. 425 00:49:13.280 --> 00:49:19.320 What are the most useful definitions of saving and investment respectively? 426 00:49:19.320 --> 00:49:25.000 The answer will depend largely on the particular problem which we are trying to clarify or 427 00:49:25.000 --> 00:49:26.840 to solve. 428 00:49:26.840 --> 00:49:32.480 In certain contexts, there will be no need for distinguishing between them. 429 00:49:32.480 --> 00:49:37.900 We may treat them as interchangeable terms, meaning the same thing. 430 00:49:37.900 --> 00:49:42.880 This is what Keynes really does in parts of the general theory. 431 00:49:42.880 --> 00:49:49.000 Saving and investment are equal there, not by some sort of continuous miracle. 432 00:49:49.000 --> 00:49:55.880 They are equal because they are so defined as to mean precisely the same thing. 433 00:49:55.880 --> 00:50:04.880 In other contexts, it may be useful to treat savings as referring merely to cash and investment as referring to goods. 434 00:50:04.880 --> 00:50:11.880 And in still other contexts, more important than the distinction between savings and investment 435 00:50:11.880 --> 00:50:20.880 will be the distinction between money savings and real savings, money investment and real investment. 436 00:50:20.880 --> 00:50:27.880 Keynes, as we shall see, only seldom and haphazardly makes these latter distinctions. 437 00:50:27.880 --> 00:50:32.880 On the contrary, he often works very hard to argue them away. 438 00:50:32.880 --> 00:50:45.880 The savings, which result merely from increased bank credit, or for that matter, from the mere printing of more fiat money, he argues, are just as genuine as any other savings. 439 00:50:45.880 --> 00:50:57.880 Page 83. Of course, if this were so, the problem of a community's acquiring sufficient savings would never exist. It could simply print them. 440 00:50:57.880 --> 00:51:07.880 It is not hard to understand why Keynes disapproves of the newfangled view that there can be investment without genuine saving. 441 00:51:07.880 --> 00:51:17.080 page 83, for this newfangled view, properly interpreted, exposes the whole set of Keynesian 442 00:51:17.080 --> 00:51:19.960 full-employment card tricks. 443 00:51:19.960 --> 00:51:26.240 I have said that we may legitimately use saving and investment with different meanings 444 00:51:26.240 --> 00:51:28.440 in different contexts. 445 00:51:28.440 --> 00:51:34.160 We must be careful, however, of course, that our meanings are always unequivocal and our 446 00:51:34.160 --> 00:51:37.080 definitions explicit. 447 00:51:37.080 --> 00:51:46.080 Above all, we must not shift meanings or definitions without explicit notice in the course of dealing with a particular problem.