Re: Savings in a Fast-Growth Economy

Robin Hanson (
Wed, 21 Apr 1999 09:52:10 -0700

Billy Brown wrote:
>Ron Kean wrote:
>> Interest rates are set by supply and demand. If almost everyone were
>> trying to lend substantial amounts, and almost no one creditworthy was
>> willing to borrow similar amounts, real interest rates for sound loans
>> would be extraordinarily low compared to what we are used to.
>> Likewise for return on capital invested in stocks.
>Well, yes, but remember there are two sides to that supply/demand equation.
>A huge supply of money looking for investments is only a problem if there
>aren't enough profitable investment possibilities. Or, to put it another
>way, if 90% of the population retires but the other 10% can profitably
>invest all of their money, then real rates of return will not collapse.
>The real question, then, is what will the supply of investment
>opportunities look like relative to the supply of investment capital.
>I believe Robin Hanson has looked into these issues a bit. Are there
>any comments from our resident economist?

Happy to comment, but I'm not sure what the question is here exactly. (I said a lot at

Robin Hanson   
RWJF Health Policy Scholar             FAX: 510-643-8614 
140 Warren Hall, UC Berkeley, CA 94720-7360 510-643-1884 after 8/99: Assist. Prof. Economics, George Mason Univ.