Growth without Normal Capacity Utilization and the Meaning of the Long-Run Saving Ratio

The ratio of saving to income over a long period is analyzed here in a theoretical context that takes account of the role of aggregate demand in the growth process, and in which it is not assumed that the economy must operate at a normal rate of capacity utilization in the long run. The very notion of the long-run saving rate is therefore redefined with respect to the one found in the literature where normal utilization is assumed. We argue that the long-run saving ratio must be conceived as the result of the interaction of many different influences and can therefore be similar in radically different circumstances and different in similar circumstances with respect both to the incentive to accumulate and to the pattern of saving decisions.