Abstract
John Maynard Keynes had provided those who study personal finance with a new understanding of the role of savings. His model determined that the savings rate should depend on a household’s level of income. Irving Fisher had earlier developed a model under the not unreasonable assumption of what are known technically to be homothetic indifference curves, for which the savings rate remains constant as income rises. Keynes departed from this assumption and instead offered motivation for a vast array of instruments that acted as imperfect substitutes for each other in our financial decisions. Savings were a substitute for current consumption. However, savings were not merely deferred consumption; they represented aspects that were precautionary and speculative and could be realized in many ways, some of which flow into traditional investment markets that increase future productivity, but others of which do not.
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© 2011 Colin Read
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Read, C. (2011). The Times. In: The Life Cyclists. Great Minds in Finance. Palgrave Macmillan, London. https://doi.org/10.1057/9780230349445_14
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DOI: https://doi.org/10.1057/9780230349445_14
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-32429-3
Online ISBN: 978-0-230-34944-5
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