Fallacy of Saving

Fallacy of Saving
by John M. Robertson (1812)


The following essay is an expansion of one written several years ago, and recently read to the Political Economy Circle of the National Liberal Club. The character of the criticism it then met with from some of the most competent members removed any hesitation I might formerly have felt as to the chance of my being right in an argument which will strike most readers at first sight as a strange paradox, and which runs counter not only to the standard authorities, but to the views of many of the younger economists who are supposed to have thrown off the old “orthodoxy.” The trained economists of the National Liberal Club, to my thinking, did not really defend the received economic doctrine of saving at all: they defended something else. And yet, while the received doctrine stands thus naked to criticism, I find that when a young economist presses the criticism he is made to suffer for it by exclusion from educational posts which are in the gift of adherents of the orthodox view. Having personally nothing to fear in this way, I feel the more bound to press the true doctrine, as I regard it, on public attention. I would preface my exposition, however, with an appeal to the candour and leniency alike of economic students and general readers, in consideration of the difficulty which attends all rectifications of abstract theory, and efforts at new economic analysis in perhaps a special degree.

As regards the practical solution propounded in the Second Part, I wish it to be noted that it is evolved as a strict economic solution of the problem led up to in the First, and, though it coincides with some proposals classified as Socialistic, is no a priori application of any abstract theory of society, and does not stand or fall with any such theory. In this connection I am glad to see that a widening hearing is being won for the doctrine of a naturalist as distinguished from an idealist treatment of social problems. This doctrine has been admirably put by a recent essayist, whose words I have as much pleasure in quoting as in endorsing:

“The solution which remains to be considered, and which the course of the argument has gradually brought into view, is the doctrine of State-control or State-regulation of industry accord-ing to the best ideas and knowledge attainable at the time. This, in distinction from the others, may be called the political solution. It is untouched by any of the arguments that have been fatal to the rest. In essence, it is the doctrine that has been instinctively acted upon both in ancient and modern States. When a mistaken industrial policy was pursued in the past, this was not because the State failed to recognise the limits of its own general sphere of action, but because it was ignorant of some particular law of economics. The remedy is not to exclude as many industrial questions as possible from the sphere of State-action, but to gain the most accurate knowledge of the conditions of particular problems, and then to apply it both negatively and positively, and not simply for the maintenance of prosperity, but for the transformation of the industrial system itself. This does not imply State-ownership of all capital, which is the Socialistic solution, but it implies that no limit shall be recognised to the action of the State upon industry except the knowledge that action would be injurious to the Commonwealth. Where there is doubt, there may be action or abstinence from action, according to the probabilities of the case. At a time like the present, when the industrial system is comparatively plastic, the bias ought to be in favour of action.”[1]

That may be taken as the political standpoint of the following treatise.

[1] Art. Politics and Industry, by Thomas Whittaker, in Macmillan’s Magazine for January, 1892.

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