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division and multiplication signs, rather than keeping them inside the paragraph and writing out such words as “equals” and “plus”. These word equations are usually easy enough to read. My appendix will cover them and more in notation. Mill’s equation may be as old as economics, although | haven’t found it put explicitly before Keynes wrote it in his General Theory 1936. It is now foundational to national accounts and macroeconomics (the art of balancing full employment with price stability). | showed why I agree only if we add a couple of imaginary asterisks. We have to mean total capital growth and pure consumption. Mill and tradition have meant physical capital and all consumption. That leaves me with something like the heuristic problem of Halliday and Resnick. They started with Newton as something familiar and accessible and common- sensical. I will follow suit. | will reason as if Mill’s equation were right. My own argument is exactly the same if we remember the hidden asterisks. That saves us all the trouble of going through it twice. Chapter 4 will restate it in terms of total including human capital just to make sure. It is an unsettling argument either way. It unsettled Solow. Chapter 2 showed why. Weare probably more comfortable to think of income as something known which we can slice into consumption and saving slices as we like. Less of one would mean that much more of the other. That would put us in charge. We can always consume less by will power. If less consumption meant more growth, we could grow at will. Keynes showed otherwise by invoking the old paradox of thrift. If everyone put money in vaults instead of consuming, consumption would go down while money piled up. But the added money would find less output to buy with it, as nothing new was created to compensate for the drop in consumption. The value of the piled-up money would vanish in inflation. Saving would equal investment in the end because both disappeared. The Y = C + I equation shows the math. It say that less Chapter 4 Mill’s Idea 1/11/16 3 HOUSE_OVERSIGHT_010994