Nation of Beancounters

The desire to touch stands in the way of development

Posted in Uncategorized by Navin Kumar on April 16, 2011

The following is from a chapter on savings in American Economic Growth: an Economists’ History of the United States.

While the law made paper investments seem more attractive, the saver was also becoming more sophisticated. In an underdeveloped country in which uncertainities about almost everything runs high, savers tend to be concerned primarily with safety. Often it appears that safety means an ability to “touch” an investment. In a one man economy, saving and investment are carried on by the same economic unit, and to remain close to one’s investments presents no insuperable problem. In a more complex society, however, unless the savers are themselves mobile, their accumulations are quite immobile. If capital is to become mobile, it must be depersonalised, and savers must be willing to touch the symbolic representation of their wealth (that is, pieces of printed paper or notations in passbooks), not the factories, forms, and machines themselves.

This is an interesting explanantion of why investors are so jittery about investments in distant lands, a jitteriness that can cause stampedes like the Asian Crisis.

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