Ȁȃȅ Partʺ: Economicsopen is possible for individuals but is not possible for the economy as a
whole (or is possible only to a lesser extent, through construction of ver-
satile rather than highly specialized capital goods). Private attempts to do
the socially impossible—keeping options open—epitomize the intertem-
poral “loose joint.”
şōŢŕŚœ, ŕŚŢőşŠřőŚŠ, ōŚŐ řśŚőť
Fundamentalist Keynesianism worried about the separation of saving and
investment decisions. Since both types of decision concern the future, an
imbalance between desired saving and desired investment implies inter-
temporal discoordination. Ļe interest rate (or array of rates) alone cannot
ensure saving/investment equilibrium, for interest is not the price of those
two aggregate flow magnitudes. Instead, it is the price of loans, broadly
interpreted, or, more comprehensively, the price of “waiting” performed
through ownership of claims and other assets.
Imbalance implies monetary disequilibrium; yet the interest rate is not
the equilibrator of money’s supply and demand, either. To understand the
relation between saving, investment, and money, let us focus on the case
of oversaving, seen as pervasive deficiency of demand for currently pro-
duced or producible goods and services. As follows from the two-sided
character of markets and of both actually accomplished and unsuccessfully
attempted transactions and as Walras’s Law states, supply-and-demand
imbalance for some things implies imbalance in the opposite direction
for other things. (Ļe aggregate value of all excess demand quantities,
due account taken of algebraic sign, is tautologically equal to zero.) In
the case considered, excess supply (negative excess demand) for currently
produced goods and services implies (positive) excess demand for other
things. What might this other thing or things be?
People who are trying to save (instead of fully spending their current
incomes on consumption) are by that very token trying to acquire savings
(“savings” with thes) in the form of real or financial assets. Which assets?
If the savers themselves are buying labor and other resources to construct
new capital goods, they are not contributing to any deficiency of current
total spending. (Hindsight might later reveal the particular mix of cap-
ital goods constructed to be inappropriate, but that is a problem differ-
ent from oversaving.) If, instead, savers are acquiring new stocks or bonds
from issuers who use the monetary proceeds (the command over resources
released from supplying current consumption) to construct capital goods,