This article is based on a portion of Chapter 15 of the author’s Capitalism: A Treatise on Economics.
According to the prevailing Keynesian dogma, consumption is the main form of spending in the economic system, while saving is mere non-spending and thus a u201Cleakageu201D from the spending stream. This dogma underlies much of government economic policy in the United States, including the so-called economic stimulus package that has just been enacted. In this article, I prove, to the contrary, that consumption is not the main form of spending in the economic system and that the source of most spending is, in fact, saving. I prove my claims by starting with the very formulations of the expenditure aggregates presented by the Keynesian doctrine itself.
