A Concept of Hoarding
T HE much-used term has never been clearly defined in the literature. It is generally agreed that it cannot mean an increase in cash holdings, for all cash (money) is held by somebody at all times. A common explanation is that hoarding is a decrease in velocity. As a matter of fact, a decrease in velocity seemingly explains most of the phenomena that are ordinarily thought to result from hoarding. There is a tendency among some economists, however, to assert that velocity is a meaningless ex post coefficient. On first thought, it seems possible to argue with those who hold this point of view. Consider the stock of coin and currency. It is held at all times, but it changes hands from time to time. If you count the number of times each unit changes hands, you have the operational basis for a seemingly satisfactory definition. When you consider demand deposits, however, difficulties arise because, in transfer of ownership, you cannot identify the unit transferred. This problem arises from the nature of a demand deposit dollar. It is not a thing; it is only an idea, accepted by practically everybody in a developed economy and dignified by an institution, the banking system, that records the idea on paper. But its essence is as evanescent as that of a poltergeist. After all, an accounting system could be devised to keep track of poltergeists; and, if people took this system seriously enough, they would talk of a stock of poltergeists, of its turnover,' and of increases and decreases in it. In other words, velocity is not a good concept to use in the definition of another term, for it does not itself possess a good operational definition. It is fairly clear, however, that the monetary concept is associated in the minds of the profession, on the one hand, with the notion of holding money and, on the other, with the notion of the flow of money through the economy. It it also associated with certain observable real phenomena, all of the sort described as deflationary. A satisfactory definition should rationalize this somewhat cloudy collection of ideas and, at the same time, demonstrate why each individual idea has some intellectual nexus, not necessarily completely sound, with it.
- DOI
- 10.2307/1927798
- Volume
- 41 (2)
- Pages
- 162
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