The Classical Concepts of a “Wage Fund” and of a “Subsistence Fund” (the Sum Total of All Funds Saved from Consumption and Available for Investment) Fell into Oblivion

Hahn (1920) and Keynes (1936) pushed Macleod’s approach to its logical conclusion. It was not savings that led to (credit-financed) investment but (credit-financed) investment that led to savings. Thus they had finally arrived at the exact antithesis of classical economics. If investments could easily be made without saving, then it would be superfluous to explore profound theories on the real economic importance of foregoing consumption. The classical concepts of a “wage fund” and of a “subsistence fund” (the sum total of all funds saved from consumption and available for investment) thus fell into oblivion. After the World War II, they were mentioned in textbooks only as a curious idea of the nineteenth century (see Braun 2012, 2014). Previously, cutting consumption was considered an indispensable prerequisite for the production of goods. Now it appeared to be superfluous, at best. More realistically, it appeared as a potential disruptive factor. After all, at least some part of income that was not spent on consumers’ goods would not be spent at all, but hoarded, with corresponding losses for “aggregate demand” and thus for production.

--Jörg Guido Hülsmann, “Mises' Monetary Theory,” in Banking and Monetary Policy from the Perspective of Austrian Economics, ed. Annette Godart-van der Kroon and Patrik Vonlanthen (Cham, CH: Springer International Publishing, 2018), 34-35.