Comment of the Day: Charles Steindel: Monday Smackdown: No, Larry Kudlow Is Not an Economist: "About 10 years ago (maybe a year or two prior to this panel) I tried to reconcile...
...the aggregate saving data (corrected by doing things like adding back investment in consumer durables) with the net worth numbers using low frequency data (like, say 10 or 20 year windows).
They really don't match up especially well, though there is some reasonable correlation (just not all that close to one); now that was done prior to BEA beefing up corporate saving with all those intangibles, so maybe a renewed look would show a closer match.
As to the ordinary NIPA household saving rate, I can't see that statistic as being especially useful for anything. It's not linked to the change in net worth, nor is it predictive of consumer spending. At best, at low frequencies it is linked to aggregate saving.
That doesn't gainsay what it appears Bob Solow was talking about: aggregate saving is, indeed, the resources set aside to provide for domestically-owned capital formation (the net worth data is merely a record of the payoff to such investments), so is critical for the long-run level of real income (Bob taught us that higher saving is probably not relevant to the long-run growth rate of real output or income, but, being the smartest man on earth, I've heard him also point out it takes a long time for that "predetermined" growth rate to re-emerge after the "temporary" shock from higher capital formation!).