Which Bill's the LiarFor the

[From Bill Powers (2004.01.24.0809 MST)]

Bill Williams 23 January 2004 –

Bill, you may remember decades ago
when your dad showed me

what was then a manuscript copy of his Leakages book. I

looked at it and pointed out that the assertion he made

that investment is a constant fraction of income was not

consistent with the data that I was familiar with. This

was the nicest possible way of putting it.

No it wasn’t. The nicest way would have been to supply the data you are
familiar with, as my father did with the data he used. Just saying you
have data to the contrary is like Joe McCarthy waving those cards in the
air on which he said the names of hundreds of communists in the State
Department were written – but which he never showed anyone. My father
cited his sources and reproduced the tables. What did you cite? Bill
Williams Almighty, that’s what.

I wasn’t confrontational in
pointing this out – I didn’t see

any reason to ruffle his feathers. If an old duffer

wants to try to set the world straight-- more power to

him. As I expected he would, your dad firmly assured me

that his numbers were correct, and he didn’t need my

What did you do to prove the contrary? Nothing but huff and puff and wave
those blank cards in the air. This is what I mean by your liking for
withholding information so you can pounce on others later for not having
known it. Note that you are referring to a MANUSCRIPT that was given to
you for review. If you had communicated what you knew (assuming that you
actually knew something, and the cards were not blank), perhaps you could
have seen to it that better data were used, assuming they exist anywhere
but in your imagination. But that isn’t your way, is it?

Over the years, from time to time
I’ve pointed out that

the claim that investment is a constant fraction of

income, which is an important part of your dad’s

leakages thesis, is contrary to the historical record

of national income accounting reports of investment and


You make it sound as if TCP made up these numbers. He got them from the
Statistical Abstracts and related sources. You will find the relevant
tables of data on pages 72, 73, and 74 of Leakage, following his
explanation of how he calculated the ratio of total expenditure on
capital goods and services (investment) to total expenditures on all
goods and services. That is what he claimed, and showed, to be
“quasi-constant”, to use his words. Looking over it now, I see
that his derivation is perfectly sound. Where are your data and your
calculations? We have nothing but your word for what you say. That is
insufficient. [ And now that I have seen your first attempt at producing
data, below, you have proven that you did not read what TCP

Now, decades after I first pointed
out to your dad that he

might want to reconsider his assertion the one about the

role of investment in the economy, you say, that I have been

unwilling to

offer any substantive discussions which run the risk

of committing to simple statements of fact.

We can cut to the chase here. All during this interminable post, while
leaping from one unwarranted conclusion to the next like a hysterical
mountain goat, you keep returning to this Big Mistake about the role of
investment. And then,.finally, you actually introduce a substantive
argument: data. Here it is.

If one is concerned with the
factors that determine

The level of income, as your dad’s Leakages scheme is,

then investment is an important variable. So, consider

the numbers in the table below. Do these numbers support

your dad’s leakages argument that investment is a constant

proportion of income? I don’t think so.

Table 2 GNP etc p. 49. Peterson


1929 $
103.9 $ 16.7

1933 $
56.0 $

1940 $
100.4 $ 13.4

1945 $
213.4 $ 11.3

1950 $
288.3 $ 55.1

1960 $
515.3 $

Wallace C. Peterson and Paul S. Estenson 1992 _Income,

Employment, and Economic Growth 7th Edition_ New York:

Norton The first edition was printed in 1962.

Unfortunately I can’t answer your question for a very good reason. You
are not using all the data that TCP used to calculate the total amount of

The calculation TCP did involved government annual investment outlay
(Ig), private annual outlay (Ip), and GNP. The ratio he computed

(Ig + Ip)/GNP.

His data for 1960 show a private outlay Ip of 71.4 billion
“current” dollars, while Peterson’s shows 78.2, a difference
possibly due to the year for which the correction for inflation was
calculated. But there was also a government investment outlay, Ig, of
31.9 billion, bringing the total investment to 103.2 billion out of a GNP
of 503.7 billion, or 20.5 percent. For the years from 1868 to 1985,
involving all the data available from three sources, this ratio remained
very close to 20%. I don’t know why TCP left out some of the years, but
it was probably because he didn’t have access to more sources of data.

From his thesis, I would predict that in the year 1933, we would find
that governments invested about 9 billion dollars. You can make your own
predictions for the other years. Perhaps you can dig up the government
outlays for those years and see how the basic formula fits

I hope you can see, Bill, that the criticisms of TCP’s statements about
investment that you have been repeating for many years are based on a
hasty reading of what he said was constant, and that what he found was a
very important and remarkable fact which economists have apparently
failed to notice.

Bill P.