Prosperity and Depression.pdf

,Chap. 8 '&Bcent Discussions on the T~ade Cycleof Professor ROBERTSON, for ex ante saving then becomes savingout of the income received on the day before. Perhaps he wouldnot want to go·so far,· because ex ante saving would then no longerbe savings out' of a future, expected and uncertain income, butout of an income which has already been received. On the otherhand, the altemative construction presents very serious difficulties.Clearly, if planned savings were to mean savings out of a futureincome, which might not materialise at all, it would not be possibleto say that " the price of 3%bonds-and thus the long-term rate ofinterest-ismedonthebondmarketbythedenlandandsupplycurvesin the same way as the price of eggs or strawberries on a villagemarket "1 and to explain that planned savings constitue a part ofthe demand for bonds. 2 How can future savings constitute supplyofcredit and affect the bond market before they are actually made ?3We conclude that the most reasonable interpretation ofProfessorOHLIN'S concept of ex ante saving is "saving from disposable) Loc cit., page 424.I This is said very clearly, although not with these words, Ope cit.,page 425. U Will not the planned supply of credit [= demand for bonds]be equal to the planned savings? . No, not quite." And thenfollow the qualifications about hoarding, dishoarding, etc., which havebeen mentioned above, page 184.• An excess of ex ante saving over ex ante investment, we have seen,leads to a deficiency of demand for consumers' goods and causes lossesto the retailers. This is one of the U processes" whicb bring aboutequality between S and I ex post. Clearly, if this construction is to makesense, ex ante saving cannot be interpreted as saving out of a future income.That could not affect retail sales now. To be sure, expectations aboutfuture income may affect present saving as a motive. But so will expectationsabout a hundred other things, and the manner in which, and extentto which, they affect the present situation is by no means uniquelydetermined.These considerations illustrate a basic difficulty of the whole ex ante(expectation) analysis : How can mere plans about the future influence thepresent situation? Peopl~ are, on the whole, not so much influencedby other people's expectations or plans, as by their actions. Doesnot the whole expectation analysis stand in need of a behaviouristicre-interpretation? As Professor Robertson puts it : "Changes in, -nesses I [he is speaking of thriftiness] and' propensities' do not inthemselves exercise any effect on the external world. Not" does a decision'to get· up early necessarily indicate any reduction in the propensity tolie in bed-it may rather indicate an increased determination not toindulge in that propensity! U (Economic Journal, September, 1938,page 555.)