 Hoarding, saving, and the paradox of thrift in a financial economySrinivas Thiruvadanthai
Review of Keynesian Economics, 2019, vol. 7, issue 2, 263-267 Abstract: In a paper in this journal (Rowe 2016), Nicholas Rowe argued that excessive hoarding of money, not excessive thrift, causes the failure of Say's law and that an increase in the desire to save, by itself, will not lead to the paradox of thrift. This comment argues Rowe's analysis has three fundamental errors: (i) he uses definitions of thrift and hoarding that are profoundly different from Keynes's; (ii) by essentially dealing with a Walrasian world, he fails to account for the principle of effective demand; and (iii) his parables fail to account for the separation of investment and saving decisions. While Rowe's parables are inadequate for understanding the Keynesian theory of monetary production, I show that, even in such parables, incorporating financial assets restores the paradox of thrift without hoarding. The key assumption for the paradox of thrift is not hoarding but the separation of investment and saving decisions. The parable is simplistic, but a similar inference can be drawn from a more detailed elaboration of the saving and investment in a financial economy by Davidson (1968). Keywords: Keynes; saving; thrift; hoarding; money; financial assets (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:elg:rokejn:v:7:y:2019:i:2:p263-267 Access Statistics for this article Review of Keynesian Economics is currently edited by Thomas Palley, MatÃas Vernengo and Esteban Pérez Caldentey More articles in Review of Keynesian Economics from Edward Elgar Publishing |
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