Title: Is the future what it used to be? A behavioral theory of the decline of saving in the west
Abstract: In all but one (Austria) of the 24 OECD countries, all forms of saving—personal, business and government—expressed as a percent of income or GDP were lower in 1987 than in 1973. This decline in national saving—amounting to over 4% of GDP—implies a serious devaluation of the future among countries that comprise 60% of world output. No persuasive explanation or model has been advanced to explain it. This article proposes a behavioral theory, based on the proposition that for most households the marginal rate of time preference (the subjective premium attached to present consumption compared to future consumption), exceeds, rather than equals, market interest rates. This implies that it always pays to spend more by borrowing. People constrain themselves from doing so by a variety of self-imposed precommitment constraints. These constraints have been seriously weakened during the past 15 years by various forms of deregulation. It is argued that national saving will not recover until the pro-savings self-imposed constraints are restored, at least in part.
Publication Year: 1994
Publication Date: 1994-01-01
Language: en
Type: article
Indexed In: ['crossref']
Access and Citation
Cited By Count: 58
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