--- William Dickens <[EMAIL PROTECTED]> wrote: > look at the question of whether savings rates are low if we define savings > as change in wealth rather than income minus consumption.
Economic income is consumption plus the change in net worth (c.n.w.), so Savings = income - consumption Savings = (consumption + c.n.w.) - consumption Savings = change in net worth and if stocks and real estate and other tangibles have risen much, savings are high. One also should put expenditure for an increase in human capital on the investment rather than consumption account, which would put US savings higher. Such investment is a subset of gross schooling expenses. One might also want a separate category of savings which excludes non-reproducible assets such as paintings or land value, since, for example, if the value of a painting rises, this is an increase in the net worth of the owner, but the increase in price is a liability to the rest of society, which would have to pay more for the painting when it changes hands. Hence the rise in the value of a painting is zero-sum for society. In contrast, when one adds to net worth by not spending what one earns, and this savings is loaned for investment in more capital goods, this is a positive rather than zero-sum game for society. So one could differentiate zero-sum from positive-sum savings. Fred Foldvary ===== [EMAIL PROTECTED]
