“It says nothing about the tenability or economic importance of savings.”
I acknowledge that my simple model ignores the possibility of using savings as a means of making production more efficient and therefore increasing real wealth in the future. But I would also add that the degree to which production can be made more efficient in the future by the use of savings is not unlimited. If the propensity to save becomes too strong, then it is possible to end up in a situation where the people on the other side of that deal will be unable to deliver. The people doing the saving will be disappointed.
“But your argument is a very crude (if that) version of the Keynesian argument which also resembles a similar argument made by Wicksell; both have been thoroughly refuted.”
Of course not. No one ever said that there are continuous increasing returns to scale. But from this, you’ve once again reached or implied the incorrect conclusion. The extent to which society elevates the productivity of labor is determined by the subjective valuations of individuals (their time preference). The point at which savings becomes “too strong” is solely determined by those subjective valuations. Either way, unemployment is in no way causally related to the demand for final goods and services (what is often called “aggregate demand”), and since individuals always prefer current consumption over future consumption (all other things equal), we shouldn’t expect to see your gloom and doom scenario of a 85% savings rate any time soon. In other words, we will see a 85% consumption rate way before we ever see a 85% savings rate (if it ever happens at all). Savings and consumption become problematic when they are forced by external factors/distorted market signals.
Simply put, the “correct” savings rate is determined by individuals/markets and not by bureaucrats and pontificating economists with econometric models.
" The point at which savings becomes “too strong” is solely determined by those subjective valuations. "
You seem to be agreeing with me that it is possible for the level of savings to become “too strong”.
“Either way, unemployment is in no way causally related to the demand for final goods and services”
Unemployment is not a feature of my model at all. The model is designed to show how savings can disappoint after an period of strong imbalance between savers and borrowers.
“Simply put, the “correct” savings rate is determined by individuals/markets and not by bureaucrats and pontificating economists with econometric models.”
I would agree that bureaucrats are likely to screw things up. But I would also argue that society can screw things up too. Society’s natural desires are not automatically correct by definition. Just as not every decision I made in the past in an attempt to increase my own future happiness turned out to be a good decision.
I wouldn’t call subjective valuations “natural,” nor would I say that society has “desires,” but yes, they are always ex ante correct, by definition. Who are you, or anyone else for that matter, to tell me what I “really” want? You people never seem to understand the inherent subjectivity of value (or the existence of scarcity), and yet, at the same time, you never bother to refute it.
Who knows better than you? Does the bureaucrat and social engineer understand your subjective preferences better than you? And if you were wrong one time, so what? You learn, you evolve. How many times must these arguments be refuted?
That you completely dreamt up, set in unbelievable (impossible) conditions, that doesn’t even begin to address the tenability/economic significance of savings.
Listen, if you’re going to make these arguments, you might as well introduce the mainstream versions of them. This way you can sound legitimate and intelligent when you spew nonsense. Individual’s will take you seriously; some will even thank you for presenting “alternative” view points on this forum. See Solow’s “golden rule steady state;” it describes the “right” amount of savings (not too much of course!).
“…set in unbelievable (impossible) conditions, that doesn’t even begin to address the tenability/economic significance of savings.”
Even Austrian economists build up their arguments from simplified scenarios involving guys on desert islands/fishing nets/loaves of bread etc. By your logic, presumably all their arguments are BS because they don’t include the effects of colateralised debt obligations, and credit default swaps.
I already acknowledged that this model did not include the possibility of savings leading to more efficient production. Maybe, once I am satisfied I have the details right for this model, I will add-in this possibility and build an improved model. Perhaps there will be some extra land that could be utilized for apple production… or some farm machinery that could be built to help increase apple production… I haven’t though it that through yet.
“Listen, if you’re going to make these arguments, you might as well introduce the mainstream versions of them.”
I am not a supporter of mainstream economics. I am attempting to understand economics from first principles.
“when you spew nonsense.”
I don’t understand why you feel the need to insult me. I haven’t insulted you. What are you doing replying to my posts if I’m full of nonsense?
There’s a big difference between simplification, for the sake of lucidity, and absurdity. I’m not attacking your model because of its simplicity, but rather because it does not even begin to address, once again, the function/significance of savings (shows extreme alterations in demand conditions within a 2-good economy). Bohm-Bawerk’s Robinson Crusoe simplification demonstrates the essential function of savings, while abstracting from all of the technical complexities (marginal rates of technical substitution, heterogeneity of each capital good, ect, ect), while maintaining the element of realism.