The theory of saving in English classical political economy
Date
1937
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Thrift is one of the two great economic virtues of modern Western Christendom, that phase of culture whose economic organization is known as Capitalism. In adage, precept, and admonition, from Poor Richard's Almanac to Thrift Week, it is always linked with industry. From time immemorial our moralists have preached that industry and thrift, hard work and self-denial, bring us riches of the spirit: sturdy character, self-respect, and the peaceful soul. This virtue, moreover, is regarded as a social as well as an individual virtue. Our leading economists, from the Father to the present, have told us that to grow rich and opulent a society must strive and save. Saving results in increased capital, and increased capital leads to progress, wealth, and well-being. Saving is recommended not only as a moral virtue, but as an economic policy. The value of thrift as an economic policy, regardless of its moral value, is being questioned at the present time. There seems to be some doubt as to whether we have not confused our ethics and our economics, as to whether we have not derived our economic policy from our Puritan morality. Malthus's number two spectre, insufficient effective demand, is again abroad in the land. The problem of effective demand has always been the skeleton in the closet for the science of economics, and a very effective closet it has been; only the cataclysmic effects of a great depression seem to be able to burst the door asunder. We hear again of underconsumption and oversaving theories of the business cycle. The prophets of heresy tell us that we have saved ourselves into the depression and must spend our way out of it. Saving bids fair to become an anti-social vice rather than a social virtue. In view of this doubt and uncertainty, it seems desirable that the orthodox theory of saving which has come down to us from the great English classical school should be subjected to close examination and analysis, and its claims to validity determined. The following study attempts to accomplish that task