Saving and Investment

One concept that was presented in the Heilbroner book was the cooperative relationship between saving and investment. The book's words were confusing (to me), and left me uncertain about what the real relationship was. This post will be dedicated to explaining the book's concept in lamens terms (by parralelling it to Civ IV.)

First what the book quotes, "When we save money, we also abstain form using a certain quantity of goods and services we might have bought. To be sure, our money savings represent a claim on goods and services, a claim that we may later excercise. Until we do, however, we have freed resources that would otherwise have been used to satisfy our immediate wants." and one more passage, "Saving is the releasing of resources from consumption; investment is the employment of these resources in making capital."

This actually paralells pretty well with Civ. In Civ IV all of your production abilities come from the cities. Each city can construct one thing (building or unit) at a time. Also, you can devote the labors of the city to producing research, money, or culture. So which is saving and which is investing? I'd say the only one considered to be saving is the production of money. This is because the end result of producing money is simply more money, each of the others (culture, research, buildings, or units) goes back into the proudction system somehow. (Unless you consider military units because often they will be amassed before they help conquer/defend and yield results.) Culture makes your people happier and expands your borders, research makes your "next technology" come about faster (which then goes back into the production system as well) and the same goes for buildings. So all of these activities could be considered Investing because they make some capital good that becomes/augments the factors of production. Money production, on the other hand, would be considered Saving because it is not immediatley recycled. However, money is still considered a capital good and can be invested just as any of the other options (like when you upgrade units, that takes money--an investment.)

Hope that can help...if you need it.