consumption C means either more investment I or less output Y. It doesn’t say
which happens.
Investment, for Keynes, meant creation of new productive assets. He was right in seeing that as the goal. But his analysis leaves too much outside. What I miss is a variable for investment quality. Investments in new productive assets in 1929 or
2008 yielded negative return. Money in vaults did better.
I prefer an approach which takes our minds off the ultimate goal in new productive assets. I drop all distinctions between saving and investment. Either word means the other. What matters is its intended and realized return. That is the missing quality variable. Notice that | don’t have to specify “risk-adjusted” return because Keynes and | are describing only at the collective (national) scale. Risk of all investments collectively is average risk. This can be implicit whenever I describe at
the collective scale.
Keynes’ analysis and equations appear in his General Theory. He was addressing the world depression. A theme was that households do most saving, while businesses do most investing. Banks collected the saving and made it available for business to borrow and invest. But business lacked the “animal spirits” to take such a risk ina slump. We saw the same story after 2008. Keynes’ proposal was for government to do the borrowing and investing instead. That’s part of the “fiscal policy” I described in Chapter 1. Here we tend to agree. That would explain his sense of urgency as to new productive capital as the most direct way to put idle plant and workers back to
work. I prefer to suspend judgment on what is a new productive asset and what isn't. | think my way of putting things is both simpler and subtler than Keynes’, although at
sacrifice of his explicit focus. Saving and investment, in my language, are the same
from the start. The maximand is return. Consumption foregone will translate into
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