Lately, I’ve been preoccupied with the use of the terms “gambling, speculation, investment, saving, and hoarding.” My reflections have been provoked by some private conversations, an interview with the economist John Kay, and a book I’m reading about an alternative economic model called “Concordian economics” by its proponent, Carmine Gorga.
Gorga’s central point seems to be that the macroeconomic chestnut “savings = investment” is wrong and the source of bad theory and bad policy. Both “savings” and “investment” are too poorly defined by economists to put anything like an equals sign between them. If you did define your terms properly, you would have to distinguish between “hoarding” and “investment” such that “income = consumption + hoarding + investment.” Whatever income you earn, you allocate across these three options.
I’m not yet far enough along in his long and dense book to determine whether his definitions of savings, hoarding, and investment are more rigorous than anyone else’s. But independently of Gorga, it strikes me that “gambling, speculation, and investment” on the one hand, and “investment, saving, and hoarding” on the other, are used not quite interchangeably, but often to describe the same thing. The particular word choice is driven by whether the speaker approves or disapproves of the activity in that context. When I’m doing it, it’s investment, when you’re doing it, it’s speculation or gambling. When I’m doing it, it’s saving, when you’re doing it, it’s hoarding.
On the one hand, I believe that we ought to (and the moral weight of “ought” is intended) be consistent about how we use those terms and not apply different standards to ourselves and to others. But on the other hand, the equivocal use of these terms may be very hard to avoid. Even with rigorous definitions and distinctions, whether a given behavior qualifies as “speculation” or “investment” may be highly contextual, depending on what that person knows or believes at that point in time, which risks she is exposed to, and therefore which risk appetites she has, etc.
In upcoming Ruminathans, I intend to distinguish five different concepts to which to attach those five different words, highlighting along the way why the terms may have approval/disapproval connotations.
The Ruminathans 