I had originally planned for this Journal to be an attempt to justify the statement “saving is more economic than consumption.” I say “attempt” because in my notes I couldn’t quite complete the argument; there was something wrong with it, although I didn’t know what. Still, I wanted to at least get my thoughts into a Journal. However, in the course of writing this Journal, the flaw in my argument became obvious. Now this Journal serves as a chronicle of a failure.
In my last Journal I explained that the purpose of an economy is to improve an actor’s future conditions. This definition flows logically from the fact that action is, and must be, future-oriented. Action is always and attempt to bring about better conditions in the future than would come about without the intervention of the actor. The end of an action can only be attained in the future; therefore, the purpose of action is make the future better.
In economic terms, improving one’s conditions generally means increasing one’s consumption ability. That is, the future is improved through the accumulation of wealth, which could be utilized in some future period for the attainment of ends. But an accumulation of wealth can only be acquired through the saving of resources produced today. These saved resources can either be stockpiled or turned into producer’s goods; either way, they become capital and lead to higher levels of possible consumption in the future. Therefore, the future gets better through saving today.
Because we become wealthier in the future through saving today, and because the purpose of every action is to become “wealthier” in the future, I thought that there must be a way to justify saving as objectively more economic than consumption.
There were some other parts of economic theory that challenged this proposition. First of all, the end of every action is, in fact, some form of consumption. But I overcame this hurdle by distinguishing between intermediary ends and the ultimate end. Intermediary ends are the things we want, and the ultimate end is why we want them: happiness/satisfaction. So, we desire a specific end, such as a sandwich, but we desire that end because of the effect that having the sandwich will have, because we believe that having the sandwich will make us happier. Since this is the purpose of every action, it seems that the ultimate end is always and forever in the future, out of reach. Indeed, man is always acting, and action is always future-oriented. Therefore, the end of every action is some form of consumption, but this consumption is merely a means for the attainment of the ultimate end of every action, which is always further in the future.
I also struggled to reconcile my proposition with the existence of time preference, the universal desire to attain a given end sooner rather than later. If we’d rather have things now than later, how could I say that something inherent in action makes postponing consumption more economic than consumption now? But I deflected this challenge by reasoning that even though we’d rather attain our ends immediately, we can’t actually attain our ends in the present. We can only change the future; therefore, despite our time preference, our actions must still be directed toward the future, toward making the future better.
But this justification was incredibly strained, and I knew it. In my notes, I admitted that I might be confusing saving with action generally. But, in writing the first draft of this Journal, I realized that the real problem was that I had misunderstood my own definition. The purpose of action is to make the future better, yes. But I had been sloppy in writing this definition, by leaving off the rest of the description, and careless in building upon this definition, by forgetting the unwritten portion. The key is the word “better”: the purpose of action is not to make the future better than the present, but to make the future better than it would have been without the action. In other words, the purpose of an economy is indeed to create more wealth for tomorrow so that we can consume more tomorrow. But this difference in wealth is not between tomorrow and today, but between two theoretical tomorrow-states. My definitions weren’t wrong, just dangerously vague.
To be clear: action is an attempt to make the actor’s future better than it would be without the action. Action is a choice between different future states. The present cannot be changed. Acting man does not compare the future with the present; he compares different possible futures and selects the one he expects will bring him the most satisfaction. Whatever the specific end of a specific action is, the end is always a change in future conditions. The end is always a future in which the conditions are more favorable than they would have been without the actor’s action.
I, personally, would prefer a future where I am wealthier than I am today. But acting for the realization of that desired future state is a choice, a value judgment. It cannot be objectively justified. Saving is not more economic than consumption. Of course, neither is consumption more economic than saving. Whether an action is economic or not is determined by the profitability of the action, which in turn is determined by the value attributed to the end attained and the end forgone. As these values are inherently subjective, so is the choice between saving and consumption.
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