Prosperity and Depression.pdf

174 AnalYsis of Theories Part Iis used to hire those workers. It,is furthermore not in accordwith the everyday usage of the terms to say that a man saves ifhe keeps his income in the form of money for a short time,owing to the simple fact that income is paid out discontinuouslyand spent more continuously. Only if it is kept unspent forlonger than the usual income period, would one ordinarily saythat it has been saved.It mus~, however, be admitted that this unusual way of puttingthe matter follows from the literal application of the definition :S = y - C. On Saturday evening, the income of the worker hasincreased; his consumption has not yet gone up; hence he hassaved. l We have here an example where this prima facie plausibledefinition of S diverges clearly from the everyday meaning of theterm. I1 Mr. Lerner admits that U if we take artificial'periods-say of tenminutes each--our definitions acquire an artificial flavour too. Wewould then have to say that in the ten-minute period in which a manreceives his weekly wage, he saves (nearly) all of it, and that in all theother ten-minute periods in which he makes any expenditure, he dissaves "(Quarterly Journal of Economics, Vol. 52, 1938, page 304.) Mr. Lerner is,however, not right when he says that this artificiality disappears U if wetake reasonable periods". Owing to the overlapping of periods, itnever disappears completely. Moreover, the order of magnitude of thephenomenon in question is not correctly indicated by speaking of tenminuteperiods.'Sometimes another account of bow S and I are equated has beengiven by followers of 1\1r. Keynes. For instance, Mrs. J. Robinson, inher Introduction .to the Theory of Employment, puts the rnatter in thefollowing way. As&um~ £1 per week is invested in housebuilding. Thenmake certain assumptions about the saving by the successive recipientsof the money. "At each round ", a certain proportion is saved byworkers, profit earners) etc. On this assumption, the author constructsa series of a~ts of saving which add up exactly to the figure of investmentoutlay (pages 20 and 21). If by u round :', turnover (change of hand)of money is meant, and if money does not circulate with infinite rapidity.this account of the matter proves the contrary to what it is intended toprove. For it takes time (strictly speaking, an infinite period of timeunder Mrs. Robinson's assumption) before the savings made at successiverounds add up to the total wbich is equal to the investment. What canbe said is that there is a tendency for S to approach I, but owing (a) to theinfinite length of these series and (b) to the overlapping of series set upby successive acts of investment, there can never, or only under veryspecial assumptions, be an absolute equality of S and I.