The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd


  • Michael Bleaney
Reference work entry


The possibility that saving could disrupt the circulation of commodities through a lack of demand was recognized at least as early as the Physiocrats. A similar argument was presented by Adam Smith. However, in both cases the analysis referred only to hoarding (i.e., the accumulation of a stock of money outside the banking system) and not to savings which were lent at interest to finance investment. Indeed both Smith and the Physiocrats regarded saving in order to transfer resources to investment with favour and were anxious to promote it. In neither case was the possibility that planned savings and planned investment could diverge examined (other than by hoarding, which was dismissed by Smith as irrational because of the loss of interest involved and therefore by implication insignificant), so that there was an implicit assumption that a decision to save was also a decision to invest.

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Michael Bleaney
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