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Comments on: Debating the paradox of thrift http://www.tvhe.co.nz/2009/03/04/debating-the-paradox-of-thrift/ The Visible Hand in Economics Sun, 08 Mar 2009 21:20:58 +0000 hourly 1 https://wordpress.org/?v=6.9.4 By: Matt Nolan http://www.tvhe.co.nz/2009/03/04/debating-the-paradox-of-thrift/#comment-17872 Sun, 08 Mar 2009 21:20:58 +0000 http://www.tvhe.co.nz/?p=3079#comment-17872 Hi John,

Well, if you value your hairdresser more than the employees of Telecom I am sure you will be willing to pay more for their service.

]]> By: John http://www.tvhe.co.nz/2009/03/04/debating-the-paradox-of-thrift/#comment-17839 Fri, 06 Mar 2009 06:16:15 +0000 http://www.tvhe.co.nz/?p=3079#comment-17839 Actually I was thinking about the effect of cutting back on other people. I don’t think of Telecom as (innocent) people (… tricky devils in fact)whereas a hairdresser is someone from my community.

]]> By: Matt Nolan http://www.tvhe.co.nz/2009/03/04/debating-the-paradox-of-thrift/#comment-17833 Fri, 06 Mar 2009 03:46:04 +0000 http://www.tvhe.co.nz/?p=3079#comment-17833 “With regard cutting back I think of communications first (mobile phone, broadband) If I stopped them (versus my wifes expensive haicuts*) what would be the effect on the economy?. I can see the hairdresser but Telecom is just a big amorphous (greedy) beast.”

The effect on welfare merely depends on how much of the decline in consumption influences how happy you are. If we were to strictly think about the economy – then for YOUR decision we are only interested in the relative price of the different activities, and the relative costs of producing them.

]]> By: Matt Nolan http://www.tvhe.co.nz/2009/03/04/debating-the-paradox-of-thrift/#comment-17832 Fri, 06 Mar 2009 03:44:33 +0000 http://www.tvhe.co.nz/?p=3079#comment-17832 “If you want to adopt a policy to spend money when the economy is in trouble you have to save up the resources to do so when times are good.”

The public merely mis-interpreted their wealth – because of an unknown housing bubble. It is unfortunate – but there is the potential for households to “over-react” and cut back spending to the point where we get unemployed resources.

Fundamentally, as long as the resources are employed in their most profitable use then there is no issue with “too much” saving – however, when this is not the case we thrown the cat amongst the pigeons.

]]> By: John http://www.tvhe.co.nz/2009/03/04/debating-the-paradox-of-thrift/#comment-17813 Thu, 05 Mar 2009 19:18:02 +0000 http://www.tvhe.co.nz/?p=3079#comment-17813 With regard cutting back I think of communications first (mobile phone, broadband) If I stopped them (versus my wifes expensive haicuts*) what would be the effect on the economy?. I can see the hairdresser but Telecom is just a big amorphous (greedy) beast.

* having suffered $10 haircuts for a while I know the effect on the psyche.

]]> By: John Hunter http://www.tvhe.co.nz/2009/03/04/debating-the-paradox-of-thrift/#comment-17684 Wed, 04 Mar 2009 03:42:31 +0000 http://www.tvhe.co.nz/?p=3079#comment-17684 There is a long term living beyond its means problem in the USA. When you do that there will be problems. We have been “solving” that problem by being non-thrifty and spending money we don’t have for at least 20 years. While I don’t mind the government adopting an economic policy to spend when the economy is very weak (say now) in principle.

I think there is a huge problem with a policy of always being un-thrifty and always spending money you don’t have to create additional demand. And that is what the USA has been doing. If you want to adopt a policy to spend money when the economy is in trouble you have to save up the resources to do so when times are good.

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