The greatest savings are made by those who have been brought up on narrow means to stern hard work, who have retained their simple habits, in spite of success in business, and who nourish a contempt for showy expenditure and a desire to be found at their death richer than they had been thought to be.This type of character is frequent in the quieter parts of old but vigorous countries, and it was very common among the middle classes in the rural districts of England for more than a generation after the pressure of the great French war and the heavy taxes that lingered in its wake.
7.Next, as to the sources of accumulation.The power to save depends on an excess of income over necessary expenditure; and this is greatest among the wealthy, In this country most of the larger incomes, but only a few of the smaller, are chiefly derived from capital.And, early in the present century, the commercial classes in England had much more saving habits than either the country gentlemen or the working classes.These causes combined to make English economists of the last generation regard savings as made almost exclusively from the profits of capital.
But even in modern England rent and the earnings of professional men and hired workers are an important source of accumulation: and they have been the chief source of it in all the earlier stages of civilization.(8*) Moreover, the middle and especially the professional classes have always denied themselves much in order to invest capital in the education of their children; while a great part of the wages of the working classes is invested in the physical health and strength of their children.The older economists took too little account of the fact that the human faculties are as important a means of production as any other kind of capital; and we may conclude, in opposition to them, that any change in the distribution of wealth which gives more to the wage receivers and less to the capitalists is likely, other things being equal, to hasten the increase of material production, and that it will not perceptibly retard the storing-up of material wealth.Of course other things would not be equal if the change were brought about by violent methods which gave a shock to public security.But a slight and temporary check to the accumulation of material wealth need not necessarily be an evil, even from a purely economic point of view, if, being made quietly and without disturbance, it provided better opportunities for the great mass of the people, increased their efficiency, and developed in them such habits of self-respect as to result in the growth of a much more efficient race of producers in the next generation.For then it might do more in the long-run to promote the growth of even material wealth than great additions to our stock of factories and steam-engines.
A people among whom wealth is well distributed, and who have high ambitions, are likely to accumulate a great deal of public property; and the savings made in this form alone by some well-to-do democracies form no inconsiderable part of the best possessions which our own age has inherited from its predecessors.The growth of the co-operative movement in all its many forms, of building societies, friendly societies, trades-unions, of working men's savings-banks etc., shows that, even so far as the immediate accumulation of material wealth goes, the resources of the country are not, as the older economists assumed, entirely lost when they are spent in paying wages.(9*)8.Having looked at the development of the methods of saving and the accumulation of wealth, we may now return to that analysis of the relations between present and deferred gratifications, which we began from another point of view in our study of Demand.(10*)We there saw that anyone, who has a stock of a commodity which is applicable to several uses, endeavours to distribute it between them all in such a way as to give him the greatest satisfaction.If he thinks he could obtain more satisfaction by transferring some of it from one use to another he will do so.
If, therefore, he makes his distribution rightly, he stops in applying it to each several use at such a point that he gets an equal amount of good out of the application that he is only just induced to make of it to each separate use; (in other words, he distributes it between the different uses in such a way that it has the same marginal utility in each).
We saw, further, that the principle remains the same whether all the uses are present, or some are present and others deferred: but that in this latter case some new considerations enter, of which the chief are, firstly, that the deferring of a gratification necessarily introduces some uncertainty as to its ever being enjoyed; and secondly, that, as human nature is constituted, a present gratification is generally, though not always, preferred to a gratification that is expected to be equal to it, and is as certain as anything can be in human life.
