A Moneyflows Approach to Consumer Behavior

Abstract

Up to the present time the social accounting framework for the analysis of consumer behavior would seem to have been provided by national income accounting. The variables of consumption and savings are defined on the basis of their meaning in national income accounting. These variables are then related to other national income concepts such as national income, disposable personal income. Variables outside the social accounting framework of national income accounting may then be introduced. In recent years a new social accounting framework has made its appearance based on moneyflows or flow of funds. The two major studies to date are the Federal Reserve's Flow of Funds in the United States, 1939-1953 (Washington, D. C.: Board of Governors of the Federal Reserve System, 1955) and Morris A. Copeland's Moneyflows in the United States (New York: National Bureau of Economic Research, 1952). The latter is the pioneering study and in addition to developing the accounting framework goes on to some interesting theoretical interpretations. The former is a fuller statistical study which takes careful pains to avoid subjective interpretations. The virtues of flow of funds analysis stem from the greater amount of information that it provides us. Most importantly, the financial transaction is given the same prominence as the nonfinancial transaction. The sources and uses of funds statement for the consumer sector shows financial sources (net increase in liabilities) of consumer credit, mortgages, etc. and financial uses (net increase in financial assets) of currency and deposits, federal obligations, etc. as well as nonfinancial sources (e.g., payroll, interest, dividends, etc.) and nonfinancial uses (durable goods purchases, taxes, etc.).1 It is to the nonfinancial transaction that national income accounting pays its exclusive attention. The personal savings category of the household account in national income accounting is a residual category and packs in highly significant nonfinancial transactions as well as the net difference between the various financial uses and financial sources of funds. Some information is lost in the flow of funds formulation of the consumer