… is from pages 151-152 of the late, great Wesleyan University economic historian Stanley Lebergott’s insightful 1975 book, Wealth and Want:
Two important economic consequences flow from higher savings by the rich.
(1) The more they save, the less they consume. They thereby leave more of the current flow of goods and services to be consumed by those with lower incomes. Moreover, by not bidding for as many goods as their incomes would permit they, insofar forth, keep down the prices of the goods bought by those with lower incomes. Their saving, for their selfish purposes, results in more goods and lower prices for persons with lower incomes than if they had invaded the market with their full incomes.
DBx: The second consequence, identified by Lebergott, of saving by the rich is lower interest rates. And lower interest rates not only better enable non-rich persons and households to borrow, but also means that more resources are available for businesses to use to launch, to expand, to modernize, and to invest in other ways that improve productivity and, ultimately, increase outputs – thus further improving the standard of living for the non-rich.
Ironically, though, the more the rich increase their savings, the higher tends to be the measured inequality of wealth.
…..
Understanding the reality identified here by Lebergott does not require a degree in economics. It requires only common sense combined with a willingness to see reality rather than to wallow in emotionally satisfying illusions.
