Troy Camplin has been busy doing a Hazlitt-job on Keynes here and here. He's focused mainly on the savings/investment issue. Now Keynes famously detested savings while simultaneously praising investment, even though Keynes himself defines them as the same thing in his GT. Now, after all my years of macro, I've discovered something that is missing from national income accounting that makes it abundantly clear investment and savings are not the same. So, I'm jumping on board this train (briefly) to make this correction, then it's back to micro and liberty!
First, let's do the "expenditure" side of national income (GDP or GNP) that we can call Y. I'm going to assume we are dealing with a large closed economy (i.e. the world). First we have households, then businesses, then government. So Y = H+B+G. H gets subdivided into consumption (C) and saving (S), but here I want to add a third element: change in cash balances (R). Before, S would have included R. But now, I want to be explicit in saying S are money flows, directly or through intermediaries, to borrowers. A finance person would call "S" a change to a person's investment portfolio (buying stocks, say). R now is the addition to cash balances that are not to be lent out. One could understand this as a bank's reserve requirement, if all S is held in the bank. R isn't small - it's 10% of bank deposits.
So now we have Y = C+S+R+B+G.
Let's subdivide B now. Business expenditure comes in the form of inventory purchases, wages, and capital expenditure. To avoid double counting, we focus on just the part we call investment (I), which (for Keynes) included fixed capital, working capital, and liquid capital. I'm going to subdivide I into capital expenditure (fixed + working, although working is a stretch) and money balances (liquid capital). Money balances aren't usually large for businesses, but they certainly are these days, and have been for a few years now. So call liquid capital L.
Now we have Y = C+S+R+I+L+G.
I don't have any plans to rehab G, so we can move to the income side. National income is still Y, but the right-hand-side changes. Household income is made up of wages (W) and returns on savings (Dh). Business income is made up of profit (P) and returns on savings (Db). Government income is taxes (T).
Y = W+Dh+P+Db+T
Equating the two sides gives: W+Dh+P+Db+T = C+S+R+I+L+G. Looks icky. Can this be cleaned up a bit? Why, yes it can! The way S&I have been defined, is that they are equal (now). Therefore, including both in the right-hand-side leads to double counting. So let's take away I.
W+Dh+P+Db+T = C+S+R+L+G.
Now let's group by by type.
Household: W+Dh = C+S+R
Note that W and Dh are after taxes.
Business: P +Db = L
Note that P for businesses is after taxes and payments to investors (Dh).
Government: T = G
It might seem strange that business doesn't have an investment expenditure anymore. Essentially what I am saying here is that the household ultimately makes the investment expenditure, but uses the business to do so on their behalf. Households, then, are the real capitalists.