6

THE  LIMIT  TO  SOCIAL  SAVING

3!

the  productive  energy  is  devoted,  not  to  producing  “  consumables,” ­
  but  to  setting  up  new  plant,  machinery,  and
unfinished  goods,  which  are,  in  their  form  or  their
economic  position,  not  consumable,  and  which  are,  in
fact,  not  consumed.  It  would  seem  unnecessary  to  thus
demonstrate  that  the  consumption  of  the  latter  nation
amounted  to  ^1,300,000,000  (/.<?.,  that  15—2  =  13),  were
it  not  for  the  general  prevalence  of  the  notion  that  saving
implies  no  reduction  in  consumption.  Adam  Smith  is
perhaps  chiefly  responsible  for  the  misconception,  by
urging  that  “What  is  annually  saved  is  as  regularly  consumed ­
  as  what  is  annually  spent,  and  nearly  in  the  same
time  too,  but  it  is  consumed  by  a  different  set  of  people.”  *
The  heart  of  the  fallacy,  which  has  been  effectively
exposed  by  various  writers,  consists  in  failing  to  perceive
that  the  difference  between  “spending”  and  “saving”
is  that  the  former,  as  an  economic  cause,  causes  “  consumables” ­
  to  be  made,  while  the  latter,  so  far  as  it  finds
an  embodiment  in  actual  forms  of  capital,  causes  “nonconsumables” ­
  to  be  made.  The  forms  of  capital  which
represent  “saving”  correspond  to  the  extra  consumption
which  would  have  taken  place  if  the  persons  saving  had
not  saved,  but  had  applied  the  money  in  demand  for
consumables.
§  20.  The  Limit  to  Social  Saving.—No  Limit
to  Individual  Saving.
This  simple  truth  that  real  saving  implies  diminished  consumption ­
  for  the  time  being  is  the  kernel  of  a  true  understanding ­
  of  the“  unemployed  "  question.  If  we  find  labour  and
*  “Wealth  of  Nations,”  p.  1496,  McCulloch;  cf.  Mill’s  “Political ­
  Economy,”  vol.  i.  ch.  v.  §  6.