CHAPTER 12

A FURTHER ELUCIDATION OF THE DISTINCTIONBETWEEN SAVINGS AND INVESTMENT 1

(i.) Savings and Investment

In the previous chapters we have been dealing onthe one hand with the earnings or money-income ofthe community and its division into two parts, one ofwhich is spent by the recipient on current consumptionand the other of which is “ saved ” ; whilst on theother we have dealt with the community’s outputof actual goods and services and its division intotwo parts, one of which is marketed and sold to con-

1 The notion of the distinction which I have made between Savings andInvestment has been gradually creeping into economic literature in quiterecent years. The first author to introduce it was, according to the German authorities,* Ludwig Mises in his Theorie des Oeldes und der Umlaufsmittel(1st edition, pp. 227 ff. and 411 ff.) published in 1912. Later on the idea wasadopted in a more explicit form by Schumpeter, and “ Forced Saving ” f(t.e. the difference between Savings and Value of Investment as defined byme, though without there being attached to the idea—so far as I am aware—anything closely corresponding to the analysis of chapters 10 and 11above) has become almost a familiar feature of the very newest German writings on Money. But so far as I am concerned—and I think thesame is true of most other economists of the English -speaking world—my indebtedness for clues which have set my mind working in the rightdirection is to Mr. D. Hi Robertson’s Banking Policy and the Price Level

* See Hahn’s article on “ Kredit ” in Handworterbuch der Staatswissen-schaften (4th edition) vol. v. p. 951, and Schumpeter , Theorie der wirtschafl-lichen Entwicklung (2nd edition, 1926), p. 156. These references are given byMises himself, Oeldwertstabilisierung und Konjunkturpolitik (1928), p. 45.

f “ Erzwungenes Sparen ” or “ gezwungenes Sparen ”. I should prefernot to use the word “ saving ” in this connection. See further footnote, p. 172.

171