Review of the Over-Savings Theory of the Over-Savings Theory

The main people who have made outstanding contributions to the study of excessive saving are Mandyville, Malthus, Hobson and Keynes. They discussed excessive saving from different perspectives. In the 1820s, Malthus created his own theory of excessive savings, but his theory of excessive savings changed greatly from Mandiville's original intention. In Malthus's framework, excessive savings emphasized a kind of "use for capital". Excessive spending. As Keynes pointed out, they were working on a theory of overinvestment.

Malthus’ theory of excessive savings is based on his understanding of savings. Malthus believed that saving is a kind of expenditure that uses income for production and increases its capital. The nature of savings “is to save part of income to increase capital.” "Therefore, in Malthus' theory of savings, the essence of savings is investment in the monetary sense. In his theory of excessive savings, Malthus first affirmed the important role of savings in economic growth. He believed that in a society, if If there is too little savings and consumption exceeds production, the country's capital will be greatly reduced and the national wealth will gradually decrease due to lack of production capacity. Therefore, there is no doubt that in countless cases, saving is the most sacred and most important thing. Binding private obligations. But he also emphasized the dangers of excessive saving: "If due to the lack of other effective consumers, the capitalists have to consume all the things that cannot be beneficially added to the national capital, then, In this case, the motivation to support their efforts in daily work must be fundamentally weakened, and they will not be able to exert the same productive ability. "Unrestricted savings are not necessarily beneficial to social and economic growth, and excessive savings will reduce social demand." If goods are already so abundant that some of them cannot be consumed profitably, then saving capital can only further increase the abundance of goods and further Prompt the already low profits to fall even lower, so this kind of savings will become relatively useless. Therefore, excessive savings will lead to oversupply of products and falling prices, and producers will no longer have the incentive to produce, thus stagnating wealth growth and leading to an economic crisis of overproduction. Therefore, Malthus believed that "the two extremes are obvious, and there must be a middle point. At this point, both production capacity and consumption desire can be taken into account to most effectively promote the growth of wealth." Excessive saving is precisely the result of saving more than Got this.

In the Malthusian framework, excessive saving is too much used to increase capital expenditure, so that it cannot be consumed profitably. Savings should have a limit. Beyond the limit, the virtues of the past may become the vices of today. Saving beyond the limit is excessive saving. In 1889, Hobson argued in "Industrial Physiology" co-authored with Mummerly that the insufficient demand faced by capitalist society was caused by excessive savings. He said in the preface of the book that since Adam Smith proposed that frugality is the source of a country's wealth and strength, and the more frugal a country is, the richer and stronger the country will be, almost all economists have firmly believed in this view, and What he wants to point out is that Adam Smith's view is not valid. Unrestricted frugality is not a virtue, and it will not make the country rich.

Hobson believed that the purpose of production is to provide utility and convenience to consumers. There is continuity in the process from the initial handling of the raw material to its final consumption as a utility or convenience. The sole use of capital is to assist in the production of these utilities and conveniences, so that the total amount of capital employed must vary with the total amount of utilities and conveniences consumed daily or weekly. Savings, while increasing the total amount of capital available, diminish the utility and convenience of its consumption; therefore any excessive expansion of this habit must lead to the accumulation of capital in excess of its required employment. This "excessive saving and the consequent excessive backlog of product supply will impose restrictions on production; that is, under normal conditions in modern industrial society, consumption restricts production, rather than production restricting Consumption.

So why does over-saving occur? In Imperialism, Hobson explains: “Because there is a long-term tendency to try to save a large part of national income that cannot be converted into new capital. This is not due to the stupidity of individual savers, but to the general distribution of income in such a way that the working class has too little of a share and the employing and possessing classes have too much of a share. Excessive saving is caused by the latter. ”

It can be seen that under Hobson’s excessive saving framework, saving should have a limit, otherwise it will cause trouble for the economy. From the perspective of capital formation, saving undoubtedly plays a positive role in the economy. Yes, saving is a virtue, but from the perspective of consumption demand, saving will reduce consumption demand. Excessive saving will lead to insufficient effective demand, thus hindering the smooth progress of social production. Keynes's excessive saving theory is mainly reflected in his works. In "Theory of Money" and "The General Theory of Employment, Interest and Money", Keynes emphasized in "Theory of Money" that the analytical framework of excessive saving that he was concerned about was that large amounts of savings could not lead to large amounts of investment, rather than that they could lead to large amounts of investment. Leading to excessive savings under large investments; in "The General Theory", Keynes followed Mandiville's point of view and regarded the disadvantages of frugality as the harm of excessive savings. It should be noted that in both works, Keynes except for income. Except for the different definitions of the connotations, the ideas of the two works are unified. Therefore, we can unify Keynes’s discussion of excessive savings into a single framework.

Keynes’s excessive savings. In theory, the so-called excessive savings means abstinence, frugality, and non-consumption beyond a certain limit. For example, Keynes believed that "although one's savings will not have a significant impact on his own income, his consumption will definitely affect others." Income... If everyone wants to consume less and save more, this attempt will inevitably fail because income will be affected. "The growth of wealth is far from dependent on the abstinence of the rich, as is generally assumed; on the contrary, its growth will be hindered by the abstinence of the rich." When discussing the role of interest rates, he believed: "Therefore, the more beautiful the virtue, the better. The stronger the determination to be thrifty, and the more adherent to orthodox methods of personal and national finance, the greater the reduction in income will be when the interest rate increases relative to the marginal efficiency of capital." And under the conditions where the interest rate is consistent with full employment. , "then virtue will regain its status."

In Keynes’s analytical framework, he profoundly analyzed the harm of excessive savings when savings cannot be converted into investment mainly from the perspective of the negative impact of savings on investment: that is, due to people’s abstinence—— Excessive saving leads to diminishing marginal efficiency of capital, which strengthens people's liquidity preference and makes it difficult to convert savings into investment, which affects social employment. Therefore, he believes that society needs to control the amount of investment.

In Keynes's view, the motivations that determine saving and investment are completely different. He believes that from a behavioral perspective, savers and investors are two completely different types of people. Saving is to preserve the value of wealth for future enjoyment. It would be better if the value of the saved wealth can appreciate. Investment is completely different. The purpose of investors is to increase the value of property. The marginal efficiency of capital is the key factor that determines investment behavior. The fundamental reason for the investment depression is the sudden collapse of the marginal efficiency of capital. And the reason for the collapse lies in people's excessive saving! It is the reduction in consumption today that produces the recession the next day. The recession on the second day deepened people's expectations for the extent of the recession on the third day. Therefore, Keynes believes that "savings only represents the desire to obtain wealth, that is, the ability to consume any item at any time." What wealth owners really want to own is "the future income of capital assets", if " If savings behavior cannot improve expected returns, then it cannot stimulate investment.”

It can be seen that in Keynes’s analysis framework, due to the separation of saving and investment subjects, excessive saving behavior of saving subjects leads to consumption. The reduction of capital efficiency and the reduction of marginal efficiency of capital have reduced the investment enthusiasm of investors and reduced social employment.