science

Social savings

Social savings is a science topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand Social savings rather than just read about it. In short: Social savings is a growth in accounting techniques in order to evaluate the historical implications of new technology on economic growth. Developed in 1950 by American economic historian and scientist Robert Fogel, explains the methodology works to estimate the cost-savings of the new technology compared with the next best alternative.

Key takeaways

Social savings belongs to science; place it in that map before memorising details.
Learn the definition first, then one example that makes the definition concrete.
Connect Social savings to a quantity you can measure, compute or draw — that is where exam questions come from.
Reproduce the core statement of Social savings from memory before moving on to harder problems.

Reference excerpt

Social savings is a growth in accounting techniques in order to evaluate the historical implications of new technology on economic growth. Developed in 1950 by American economic historian and scientist Robert Fogel, explains the methodology works to estimate the cost-savings of the new technology compared with the next best alternative. The first oral presentation was at the 1960 Purdue Cliometrics meeting, and the first published version was in the Journal of economic history in 1962. A recent survey can be found in "economic and history: surveys in Cliometrics", edited by David Greasley and Les Oxley and published by Wiley-Blackwell in 2011. The relevant chapter is entitled "social savings" and is by Tim Leunig, London School of Economics. [1]

Calculation The amount of social savings (SS) may be calculated as

SS = (PT0 − PT1)T1 where PT0 is the price per unit of the alternative technology, PT1 is the price of the technology being evaluated. T1 is the quantity processed by the technology being evaluated. This saving in resource costs may be taken to be equal to the gain in real national income. Two noted social savings applications include social savings analysis on the contribution of the railway to the 19th century economic growth and the impact of information technology to the 20th century economic growth.

Railroads and American economic growth Social savings was introduced and applied to the railroads in a seminal book by economic historian and scientist Robert Fogel. The social savings analysis involved using quantitative methods to imagine what the U.S. economy would have been like in 1890 if there were no railroads. In the absence of railroads, freight transportation by rivers and canals would have been only moderately more expensive along most common routes. Fogel concluded that the difference in cost (or "social savings") attributable to railroads was negligible - about 2.7% of GNP. This counterfactual history view was vastly different from views proffered by railroad historians and made a controversial name for cliometrics.

References

Worked examples

Example 1 — a first encounter with Social savings

Start with the simplest possible case. Write down what Social savings claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to Social savings before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about Social savings ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of Social savings

In research: Social savings appears in science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses Social savings in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: Social savings is common in secondary-school and first-year university syllabi. It links to neighbouring topics Academic disciplines, Economic growth, Economic history studies, so understanding it makes those chapters shorter.
In everyday life: Look for Social savings outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

Ask Teacher Smith questions about this articleOpens your AI tutor with a question about “Social savings” →

Affiliate

Preply — study more efficiently by working with a personal tutor. 50% off.

How to study Social savings in 20 minutes

Read the reference excerpt below once, without taking notes.
Close the page and write down what Social savings means in your own words.
Compare your version with the excerpt and mark what you missed.
Work through the three examples above with pen and paper.
Explain Social savings out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is Social savings in simple terms?

Why does Social savings matter?

Because it connects several science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study Social savings?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on Social savings.