Murray N. Rothbard, “Are Savings Too Low?” — Summary

This file is a short single-author economic essay, chapter 9 of Making Economic Sense. Rothbard addresses a late-1980s policy complaint: that Americans save too little compared with Germans or Japanese, thereby weakening investment and future prosperity. His essay moves from skepticism about savings statistics, to a conceptual defense of individual time preference, to a political-economy argument that government itself is the chief force depressing genuine saving and investment.

Rothbard first grants that official figures may show low personal savings, but he treats the statistical dispute as secondary. The deeper issue is whether economists or politicians can identify a “correct” saving rate from outside individual choice.

The most vital question is: even conceding that U.S. savings are 1.5% of national income and Japanese savings are 15%, what, if anything, is the proper amount or percentage of savings?

His core conceptual move is Austrian: saving is not a collective duty but an expression of individual time preference. People choose between present consumption and future income according to their circumstances and value scales.

Consumers voluntarily decide to divide their income into spending on consumer goods, as against saving and investment for future income.

Because such choices are subjective, Rothbard denies that an external observer can condemn them as economically “too low” without importing a coercive standard. Nor can moral exhortation solve the problem, since morality supplies qualitative prohibitions, not numerical saving targets.

Vague exhortations to save more make little moral or economic sense.

The essay then pivots. Rothbard does not deny that saving and investment are too low; he denies that the blame lies with private consumers. The real distortion, he argues, comes from policies that forcibly shift resources away from saving and capital formation toward consumption by the state and its beneficiaries.

In many ways, government steps in, employs many instruments of coercion, and skews the voluntary choices of society away from saving and investment and toward consumption.

This reframes the policy question. Rather than preaching thrift or expanding public “investment,” government should remove its anti-saving interventions. Rothbard cites the loss of IRA deductibility and the higher capital-gains tax after the 1986 Tax Reform Act as examples of direct assaults on middle-class saving and accumulated wealth.

But one thing which the government can legitimately do is simply get rid of its own coercive influence in favor of consumption and against saving and investment.

Against Keynesian or fiscalist claims that deficits alone constitute public “dissaving,” Rothbard argues that taxation and spending themselves reduce the resources available to productive savers. He sharply rejects national-income accounting conventions that classify most government spending as investment.

Actually, while the national income statistics assume that all government spending except welfare payments are “investment,” the truth is precisely the opposite.

For Rothbard, the distinction turns on production for consumers. Business investment expands the future supply of goods; government spending expresses political preferences financed by coercion. Thus the essay’s relevance lies in its challenge to both conservative thrift-moralism and liberal public-investment programs: both misidentify the source of low saving.

All business spending is investment because it goes toward increasing the production of goods that will eventually be sold to consumers.

The conclusion is characteristically radical. Rothbard accepts the existence of too little saving, but locates its cause in the tax-and-spend state rather than in household irresponsibility. Restoring IRA deductions and repealing capital-gains taxation would help, but only marginally. The necessary remedy is a broad reduction of government’s claim on social resources.

What is really needed is a drastic reduction of all government taxation and spending, state, local, and federal, across the board.

The essay’s structure is therefore polemical but systematic: it begins with a fashionable economic anxiety, dissolves the supposed objective standard behind it, and then reconstructs the problem as one of coercive political allocation. Its main thesis is that saving cannot be judged too low by technocratic comparison alone; only when government has distorted voluntary time preferences can low saving be treated as a policy problem, and then the remedy is not exhortation or public spending but radical fiscal retrenchment.