Economics in One Lesson

1
¼
2
per-
centage points. (Percentage points are taken instead of a compounded
percentage merely to simplify the arithmetic.) The picture that we get for
3
Historically 20 percent would represent approximately the gross amount of the 
gross
national product devoted each year to capital formation (excluding consumers’ equip-
ment). When allowance is made for capital consumption, however,
net
annual savings have
been closer to 12 percent. Cf. George Terborgh,
The Bogey of Economic Maturity
(Chicago:
Machinery and Allied Products Institute, 1945).
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an eleven-year period, say, would then run something like this in terms
of index numbers:
Year
Total Consumers’
Capital 
Production
Goods
Goods 
Produced
Produced
First
100
80
20*
Second
102.5
82
20.5
Third
105
84
21
Fourth
107.5
86
21.5
Fifth
110
88
22
Sixth
112.5
90
22.5
Seventh
115
92
23
Eighth
117.5
94
23.5
Ninth
120
96
24
Tenth
122.5
98
24.5
Eleventh
125
100
25
*This of course assumes the process of saving and investment to
have been already under way at the same rate.
The first thing to be noticed about this table is that total production
increases each year 
because ofthe saving,
and would not have increased with-
out it. (It is possible no doubt to imagine that improvements and new
inventions merely in 
replaced
machinery and other capital goods of a value
no greater than the old would increase the national productivity; but this
increase would amount to very little, and the argument in any case
assumes enough 
prior
investment to have made the existing machinery
possible.) The saving has been used year after year to increase the quan-
tity or improve the quality of existing machinery, and so to increase the
nation’s output of goods. There is, it is true (if that for some strange rea-
son is considered an objection), a larger and larger “cake” each year.
Each year, it is true, not 
all
of the currently produced “cake” is con-
sumed. But there is no irrational or cumulative consumer restraint. For
The Assault on Saving
165
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166
Economics in One Lesson
each year a larger and larger cake is in fact consumed; until, at the end of
eleven years (in our illustration), the annual consumers’ cake alone is
equal to the combined consumers’ and producers’ cakes of the first year.
Moreover, the capital equipment, the ability to produce goods, is itself 25
percent greater than in the first year.
Let us observe a few other points. The fact that 20 percent of the
national income goes each year for saving does not upset the con-
sumers’ goods industries in the least. If they sold only the 80 units
they produced in the first year (and there were no rise in prices caused
by unsatisfied demand) they would certainly not be foolish enough to
build their production plans on the assumption that they were going
to sell 100 units in the second year. The consumers’ goods industries,
in other words, are 
already geared 
to the assumption that the past situa-
tion in regard to the rate of savings will continue. Only an unexpected