Smith’s system has no lags, leakages, hoarding, or debt, merely saving and investment

Evidence

For Smith, because saving leads to investment, there are no lags and leakages of income; neither hoarding nor uncertainty is possible. Consequently, debt has no role in his system while saving is both good and natural to us. As Smith puts it, “Parsimony, not industry, is the immediate cause of the increase of capital … whatever industry might acquire, if parsimony did not save and store up, the capital would never be the greater.” Frugality thus becomes virtue while prodigality becomes vice such that “if the prodigality of some was not compensated by the frugality of others, the conduct of every prodigal, by feeding the idle with the bread of the industrious … [would] impoverish the entire country.” — Mark Blyth, Austerity, 297

Categorization

• DEFINE: Lays out the classical saving-investment identity that later austerity logic rests on — no leakages means no countercyclical role for debt.
• DEEPTHINKING: The moral transubstantiation of frugality into virtue and prodigality into vice, rooted in a psychological claim about a natural-born Scots sentiment, is the deep well austerity draws its moral force from.
• ADDENDUM: Directly relevant to ‘On Sacrifice’ in how the moral load of sacrifice/parsimony is placed on ordinary households, and to the pragmatic morality of debt obligation.
• XREF: connects to: Smith grounded capitalism in a natural human disposition to save rather than spend — Mark Blyth, Austerity: The History of a Dangerous…, 298

Broader Connections

• Smith grounded capitalism in a natural human disposition to save rather than spend #corroborates (0.85) — Mark Blyth, Austerity, 298