Growth,Normal Capacity Utilization and the Long-Run Saving Ratio: A Comment

In a recent paper Attilio Trezzini presents an explanation of the saving ratio that does not rely on normal capacity utilization positions. Trezzini instead focuses on the fluctuations of consumption and investment. But that very focus, I argue, requires a different kind of approach. Once the traditional theory of saving is discarded, the ‘indeterminacy’ of the saving ratio opens the way to an analysis of the evolution of consumption, and of how that evolution affects aggregate demand. The generation and evolution of autonomous demand are matters of obvious relevance to the classical Keynesian approach to the analysis of growth. The present comment takes James Duesenberry’s criticism of demand theory as the starting point for an examination of the evolving standard of consumption and autonomous (‘innovative’) investment, therefore addressing directly the investment–consumption relationship. There are of course a number of complicated questions involved and they have not yet been satisfactorily analysed. They are part of the necessary task of articulating a theory of consumption consistent with demand-led growth and forward-looking investment decisions.