Saving and Investment: A Praxeological Approach

Abstract

Clarity in language in the sin qua non of any intellectual pursuit. If we cannot communicate accurately with one another, there is no hope of progress in scientific endeavor. Nowhere is this more true, at least in economics, than with regard to such concepts as real, as opposed to financial, saving and investment. The present paper constitutes an attempt to clarify the sometimes confusing dialogue that often ensues in this arena when sufficient care is not taken to distinguish between these very different topics. To wit, it is our hypothesis that while financial saving and investment may indeed and often do diverge from one another, the same is not at all true of real saving and real investment. In the latter case, real saving does not precede real investment; rather, it is coincident with it.