Reflections on Saving Behavior

Economics needs no special excuse to study the determinants of saving. It is one of those perennial questions always on the agenda. I remember being taught that the Founding Fathers, among them Hume and Smith, had definite views about saving behavior. (I even think I remember being taught that they held a rather sociological theory--thrifty bourgeois merchants, spendthrift hereditary landlords--and The Fable of the Bees contains the same suggestion.) Nevertheless, it is no accident--as we deep-thinkers say--that a conference on government policies affecting saving should be taking place right now. There has clearly been an upsurge of interest in the subject, in this country and elsewhere. One source of curiosity was the apparent fall in reported household saving rates in the United States after 1970 and more particularly after 1975. That may turn out to have been a nonevent, partly a measurement error, partly a short-run phenomenon, partly a shift to other forms of saving, we are still not sure. But whether it happened or not, it helped to focus attention on the saving rate. A more substantial impulse came from the international comparisons, now refined and analyzed in the valuable OECD work of Sturm and Blades. At a time when the U.S. economy felt itself to be losing out in competition with other countries, especially West Germany and Japan, both in international competitiveness and in general economic performance, it was natural to ask: what do they do that we don’t do? Clearly one of the things they do is to save and invest a larger share of aggregate income. Now, of course, raising the saving rate has become a declared object of national policy. The arguments offered on behalf of the policy are not always cogent; and the particular policy measures proposed are not always effective. But it is easy to see why questions about saving behavior are now of special interest. A question can be of interest without being interesting: think of the somewhat related fuss about imminent "capital shortage" just a few years ago. As I mentioned at the very beginning, however, the study of saving is a hardy perennial. It is so closely connected with other aspects of social and economic structure that the basic questions may never be permanently settled. As the dairy industry used to say about milk, you never outgrow your need for the study of saving behavior. To the eye of an economic theorist, those large international differences in saving rates are the obvious target for explanation. Reasonable p~P!~ may ~iffe~ ~ou~ ical distinctions between parameters. But if theory can contribute anything