about me
game theory
... more
Subscribe Weblog

"The notion of saving as "postponed consumption" is common in economic literature, yet it seems to embody a profound misconception of the nature both of saving and consumption. The difficulty seems to arise because of a confusion between the idea of consumption as we have used it in this work, and as it is also used by the classical economists, as the "using up" or the destruction of stocks of goods, and the idea of consumption as the source of satisfactions or enjoyments. In fact these are two quite distinct ideas. Enjoyment or satisfaction is normally derived not from the using up but from the use of a good. This is obvious in the case of durable goods. When I go for a ride in my car the fact that the car is being consumed--i.e., is wearing out--in no way contributes to my satisfaction; indeed, quite the reverse. What I get satisfaction from is the use of the stock of goods, not from their consumption. It is the size of the house we live in, the elegance of the clothes we wear, that give us satisfactions, not the incidental and regrettable fact that in the course of yielding these satisfactions, or even when they are not yielding satisfactions, they happen to be afflicted by decay and consumption.

The reader may object that this argument does not apply to non-durables, or "one-use goods," such as food, which are destroyed in the very act of enjoying them. It is only because consumption and satisfaction are close together in time, however, that we tend to identify them; analytically they must be kept separate. Even in the case of none-use goods economy in consumption is always desirable, and if we examine the use of these goods closely we will always find that they are consumed in the maintenance of some desired but depreciating state. Thus we burn fuel because the warmth of our houses "depreciates" in cold climate. The less fuel we can burn to maintain a given temperature, the better off we are. We need food similarly to maintain certain bodily states which likewise depreciate. The less food we need to keep us from being hungry and to maintain our bodily temperature and energy, the better off we are. Similarly we need entertainment to maintain certain mental or emotional states. It should be observed that the depreciation of goods (i.e., of desirable states) frequently involves their physical growth. Thus a shaved chin, a clipped head, or a mowed lawn depreciates by the process of growth of a "discommodity" (whiskers, hair, grass) and needs to be restored by periodic shaving, haircutting, or mowing. In this case it is the growth of the discommodity which constitutes "consumption" in the economic sense, and its removal which constitutes production.

In the light of these considerations, then, what is the significance of "saving"? Saving is the process by which goods are accumulated--i.e., by which the total stock of goods is increased. This can only be done by producing more than is consumed. If society is producing at capacity, saving does imply a certain "sacrifice" of consumption, in the sense that consumption would be greater if there were no saving. The sacrifice of consumption is also likely to lead to a sacrifice of satisfactions, unless there is at the same time an economizing of consumption--i.e., a decline in the amount of consumption which is necessary to maintain given states of satisfaction. Because of these sacrifices, however, the total stock of goods (desirable states) is increased, and the total future flow of satisfactions is presumably increased also. In this sense saving does involve the sacrifice of present satisfaction in order to increase satisfaction in the future. It does not, however, necessarily involve the sacrifice of present consumption in order to increase future consumption. It is true that future consumption may be increased as a result of saving, both because a larger stock of goods in itself implies a higher rate of consumption and because the accumulation of the larger stock may permit higher rates of production. We do not generally, however, accumulate now in order that we may decumulate in the future; we do not build up a stock of goods in order to tear it down in the future, but in order to be able to maintain and increase this stock in the future. We have not built up all this apparatus of houses, farms, roads, machines harbors, and factories in order that some day we may allow them to fall down and so return to living in holes in the ground and to grubbing our food from berry bushes!

An illustration may clarify these principles. Suppose that we have a society which is living just above the edge of subsistence, with its productive activities just sufficient to maintain the bodily strength of its people, to reproduce the generations as they die off, and to maintain the miserable huts in which the people live and the scanty clothes which they wear. How does such a society progress to a better state? If it is to improve, it is clear that it must build up its stock of capital: it must have more implements, more machines, more live-stock, better houses, and so on. In order to do this (without aid from outside) it must withdraw resources from maintaining the existing fabric of the society in order to devote them to making the increased stock of implements, etc. This means that some of its existing states cannot be maintained as well as before; people may have to go a little hungry in order that the implement makers can be spared from food-production, leisure time and ceremonial activities may have to be skimped in order to release time for building, and so on. All this involves curtailment of satisfactions as well as of consumption. If, now, the result of this process is simply a larger stock of things--bigger houses, better clothes, and so on--without any improvement in the productivity of the society, as measured in some sense by output per man-hour, the society may be no better off than before. In order to maintain its bigger houses and finer clothes the society may still have to withdraw resources from previously enjoyed occupations, though not so much as in the period of building up the stock. If, however, the increase stock is at least partly in the form of instruments and implements which incerease output per man-hour, the society is permanently richer as a result of the accumulation; and if the improvement is sufficient it will not only be able to maintain its increased stock with no more effort than it previously took to maintain its smaller stock, but may even be able to maintain the larger stock with less effort than it took to maintain the smaller one. In that happy event the society will not only be richer, but will find it easier to get still richer, as it will be able to devote further accumulation in the resources released from maintenance by its increased productivity."[1]

[1] Boulding, K. E. (1955), Economic Analysis, 3 edn, Harper & Row, New York, pp. 363-366
maskodok meinte am 15. Jan, 01:11:
Interesting topic for a blog. I have been searching the Internet for fun and came upon your website. Fabulous post. Thanks a ton for sharing your knowledge! It is great to see that some people still put in an effort into managing their websites. I'll be sure to check back again real soon.
Mobil Sedan COrolla,IDrpoker.com agen Texas poker Online Indonesia Terpercaya, Mobil Sedan COrolla, Cipto Junaedy 
kimcil (guest) antwortete am 7. Apr, 12:44:
An international team of 18 mathematicians has mapped one of the largest and most complicated structures in mathematics. If written out on paper, the calculation describing this structure, known as E8, would cover an area the size of Manhattan.
alfamart official partner merchandise fifa piala dunia brazil 2014
Unit Link Terbaik di Indonesia Commonwealth Life Investra Link 
K,E (guest) meinte am 13. Feb, 08:30:
Logo de la marque est courbé vers la droite de l'affaire. Toute la surface du cadran est rempli de diamants pleine taille, impliquant 879 de 5,8 kt. Avec le cas d'une lunette fixe, tenant un cristal minéral haut. Respirez la fonction de la vie, est un mouvement à quartz fiable qui garantit la réserve de marche. TAG Heuer tableau féminin contient un bracelet en satin rouge sur le poignet de l'utilisateur, replique montres qui se termine par une boucle réglable. 
begedir antwortete am 17. May, 16:40:
thanks a lot for sharing this belajar bahasa inggris , cara cepat hamil , khasiat daun kemangi , belajar bahasa inggris dengan cepat 
daria (guest) meinte am 26. Feb, 23:18:
Consumption is such a wide concept, that we could be able to hang around this topic for days. The important part is, and market specialists know about this, consumption meets expansion areas accordingly to the specific needs of different public categories. For instance, I am very happy of the part of the country I chose to live in, because I love summer and warm days, but on the other side, I don`t know what I would have done without the Lozier services. You truly need something like this in your place. 
ttlwu meinte am 9. Jun, 10:57:
I think
This is a great inspiring article.I am pretty much pleased with your good work.You put really very helpful information. Keep it up. Keep blogging. Looking to reading your next post.
trouble spot training 
tsflw meinte am 6. Aug, 16:44:
Hey what a brilliant post I have come across and believe me I have been searching out for this similar kind of post for past a week and hardly came across this. Thank you very much and will look for more postings from you. megashare pacific rim 
ttlwu meinte am 16. Aug, 17:08:
Very useful post. This is my first time i visit here. I found so many interesting stuff in your blog especially its discussion. Really its great article. Keep it up.
e zigarette