I have to be brief because we're going to church in a bit. But I know at least some of you are following the tennis match between Robert Wenzel and me. We are arguing over whether we should call it "saving" if someone contributes extra cash to a piggy jar on the dresser. I say yes, Wenzel says no. (If you want to get up to speed, here is Wenzel's latest post, which then has a link allowing you to backtrack to the beginning of this debate.)

OK first of all, let me say I was impressed. Like Darth Vader when he says, "All too easy," I thought I blew up Wenzel with my last post. But then he jumped 30 foot out of my trap, leading me to now say, "Impressive." (And no I'm not claiming to be Wenzel's dad.) In particular, the distinction I made between "saving" and "investment" is one that Rothbard might not agree with, though a Hayekian surely would. So in the interest of brevity I withdraw my objection to Wenzel on that front.

Like I said, I need to be brief, so I'm not going to parse Wenzel's post, or go through the long Rothbard quote he listed. Rather I am going to reassert my view, and if you read Rothbard carefully I think you'll see that this is entirely consistent with what he's saying.

Someone gets $1000 in income. We can picture it as cash if we want, but the person could be paid in postage stamps or chickens. That might be part of our confusion here, that we think of someone as "starting out" with cash as that period's income flow, but it need not be.

OK, the person then has to decide how much of that $1000 to consume or to save. Let's say he decides to spend $800 on food, gas for his car, and buying a few DVDs (which feature movies for enjoyment, not training videos for his career). He has clearly consumed $800.

Now, I want to say that the entire $200 remaining is saving. The guy might spend $150 on a CD from his bank, and then put the other $50 underneath his mattress. I claim that these are both forms of saving, even though one "goes to work pushing up capital goods prices when the bank lends it out" [Wenzel's description] and the other "merely" goes to increasing the guy's cash balances.

I'm hoping Wenzel will now say, "Oh OK, I buy that, and so would Rothbard. My whole point was just that the saving/consumption decision happens first, and then it's just a matter of allocation among different ways of holding wealth. We're all good."

Last point: I'm just trying to show the absurdity of (what I take to be) Wenzel's view so far. Suppose I put $100 a week into my jar, and then after 10 weeks I go to Vegas and blow the $1000 on the tables. I come home and say, "Well, I saved up for 10 weeks to enjoy one hour of amazing consumption. I postponed all of the potential consumption I could have had, in order to consume it all in one fell swoop at the tables. Eight weeks ago, I was trading away $100 in potential present goods, for what at that time was an additional $100 in future goods--i.e. enjoyment at Vegas."

I think Wenzel (given his earlier views) would have to say, "No you didn't. That money never hit a bank or was out 'in the economy' pushing up prices, so there was never any saving."

UPDATE: Actually, I realized the above isn't quite right. It's not that the saving/consumption decision happens first (in chronological time), it's rather that we can evaluate the guy's actions with that lens, and we can also evaluate his actions by asking what happened to cash balances. I'm not saying that his decision to save a given $150 is more primordial than his decision to put it into a bank CD rather than buy some shares of corporate stock. We can simply view him as allocating his money to the most highly ranked ends, which include various units of food, bank CDs, DVDs, increased cash balances, etc.