Historical economic commentary on John Stuart Mill's views on saving and capital

consumed bread, that is, every member of society, would from the same outlay have somewhat larger returns. The whole series of instruments owned by the society would be somewhat more productive, and would be carried to an order of quicker returns.” The clearest expression, and probably clearest even today, came from Mill in 1848. He put it that output growth can precede and explain capital growth as well as the reverse. Crediting Rae, he wrote: There are other cases in which the term saving, with the associations usually belonging to it, does not exactly fit the operation by which capital is increased. If it were said, for instance, that the only way to accelerate the increase of capital is by increase of saving, the idea would probably be suggested of greater abstinence, and increased privation. But itis obvious that whatever increases the productive power of labor creates an additional fund to make savings from, and enables capital to be enlarged not only without additional privation, but concurrently with an increase of personal consumption. Nevertheless, there is here an increase of saving, in the scientific sense. Though there is more consumed, there is also more spared. There is a greater excess of production over consumption. It is consistent with correctness to call this a greater saving. Though the term is not unobjectionable, there is no other which is not liable to as great objections. To consume less than is produced, is saving; and that is the process by which capital is increased; not necessarily by consuming less, absolutely. We must not allow ourselves to be so much the slaves of words, as to be unable to use the word saving in this sense, without being in danger of forgetting that to increase capital there is another way besides consuming less, namely, to produce more. The words “accelerate” and “concurrently” show that Mill understood calculus. His autobiography says that he hadn’t really learned it from his father James, who had bought a book and was trying to teach himself and the 13-year old son at the same time. The son studied it in his later teens at school in France. He like me was writing for everyone, and preferred to keep explicit math off the page. But the quote reminds us that the only alternative in economics is implicit math in sentence form. The paragraph implies the Y = C + I equation: output equals consumption plus investment. I go a tad farther, starting one chapter ago, by offsetting my word equations from the running text. These show equal signs and plus and minus and Chapter 4 Mill’s Idea 1/11/16 2 HOUSE_OVERSIGHT_010993