ȀȆȅ Partʺ: Economicsreal income, and about a savings gap that grows with income and wealth
and so supposedly becomes all the harder to fill with real investment
spending, especially as real capital formation supposedly leaves fewer and
fewer attractive opportunities for still further investment. Saving, as such,
cannot pose a problem. People cannot save without acquiring some assets
or other. If this process, including the associated financial transactions,
results in real capital formation, well and good; opportunities for further
investment still are not foreclosed. Complementarities exist among capi-
tal goods; having more of some expands profitable opportunities to con-
struct more of others. Furthermore, sectors of the economy employing
additional capital goods enjoy increased productivity and real incomes,
which increase the demands for the outputs of other sectors and for the
resources to produce them. If, on the other hand, savers neither acquire
real assets themselves nor acquire securities by transferring their command
over resources to entrepreneurs who will construct assets, then they must
be trying to build up their holdings of money. Yet Keynes, says Hutt, tried
to put the blame on an excessive propensity to save as such, obscuring the
liquidity-preference or demand-for-money aspect of the disequilibrium.
(Ļis charge, it seems to me, overlooks chapterȀȆof theGeneral Ļeory.
What Keynes might better be charged with is vagueness, along with incon-
sistency among different parts of his book.)
Actually, says Hutt (ȀȈȆȈ, p.ȁȈȄ), “saving preference and liquidity
preference are as unrelated as demands for monocles and bubble gum.”
Even when an intensified demand for money balances is contributing to
macroeconomic disequilibrium, the blame should fall not on this particu-
lar change in preferences but on the failure of prices to accommodate it.
With prices insufficiently flexible,anychange in technology or resources
or preferences, including not only a strengthening but even a weakening
of savings preference or of liquidity preference, can impede market clear-
ing, exchanges, and production. Diagnosis must thus focus on how well
or poorly the pricing process is working, and why.
ŐŕşőŝšŕŘŕŎŞŕšř ŠŔőśŞŕőş
In emphasizing the infectiousness of the failure of some markets to clear
(and, more cheerfully, the cumulative character of recovery when some
prices initiate adjustment to market-clearing levels), Hutt’s doctrine par-
allels a line of advance in macroeconomics pioneered by Robert Clower
(ȀȈȅȄ,ȀȈȅȆ) and Axel Leijonhufvud (ȀȈȅȇ) and followed by such other