capital growth insofar as rate of return actually realized matches the current norm.
Less return makes less growth than consumption sacrificed, and more makes more.
But collective return can be a surprise. Boom years and bust years arrive unforeseen. The cost of investment in consumption given up, whether individually or collectively, never agrees exactly with what it proves to be worth at market. Gunnar Myrdal, in 1939, coined the terms ex ante for the first and ex post for the second. The bucking
bronco describes the ex post picture overall.
Ex ante (at cost) and ex post (at market) investment agree when market-realized return holds unchanged. Lower return means that ex post outcomes fell short of ex ante cost and expectations. Higher return means the reverse. That gives the context of Mill’s idea. And he clearly isn’t talking about growing or declining by random luck. His prime mover is “whatever increase the productive power of labor.” He knew that this meant innovative ideas. Can we dial them in as we like? All he says is that
they need cost nothing in consumption missed. Then how might that work?
Gross and Net Investment
Keynes, accepting the Y =! + C equation, defined saving S as gross income less consumption C.] draw the impression that he implicitly defined output as creation of economic value. So do I. He defined gross investment I as gross output less consumption. Gross in both cases meant gross of depreciation. He knew that income and output are equal, at all scales, since the first means rights to the second, and gave both the symbol Y as! do. It followed that saving and investment are also equal. The meaning was that actually realized saving, as distinct from consumption restraint in hopes of saving, had to be realized in investment. This is the home truth
which I accept but prefer to rephrase.
I have traced Keynes’ argument and language on these points because | think it is now generally accepted by Keynesian and anti-Keynesian and neo-Keynesian
schools alike. That’s why I think my own interpretation differs from a general
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