The Paradox of Thrift

[Kurt_and_Hunter]

The paradox of thrift (or paradox of saving) is a paradox of economics, popularized by John Maynard Keynes, though it had been stated as early as 1714 in The Fable of the Bees,<1> and similar sentiments date to antiquity.<2> The paradox states that if everyone tries to save more money during times of recession, then aggregate demand will fall and will in turn lower total savings in the population because of the decrease in consumption and economic growth. The paradox is, narrowly speaking, that total savings may fall even when individual savings attempt to rise, and, broadly speaking, that increases in savings may be harmful to an economy.<3> Both the narrow and broad claims are paradoxical within the assumption underlying the fallacy of composition, namely that what is true of the parts must be true of the whole. The narrow claim transparently contradicts this assumption, and the broad one does so by implication, because while individual thrift is generally averred to be good for the economy, the paradox of thrift holds that collective thrift may be bad for the economy.

http://en.wikipedia.org/wiki/Paradox_of_thrift

[LWolf]

1. While this is obviously thriftier than it could have been,

it wasn't all that thrifty.

That dress cost more than I expect to have paid for a lifetime of clothing at the end of my life. And I wasn't even born for another 7 years at the time that dress was purchased, so that doesn't take inflation into account. How much would that dress have cost by the time I was born, or by the time I started purchasing my own clothes, at the age of 16?

What would be better for the economy? Bigger and less private, requiring the hiring of many more people, or smaller, more private, and the big $$ dropped on one dress?

I don't really have a "side" in this particular debate; just some random thoughts.

[Phentex]

4. Not to mention the island itself, expensive inn, ferry over...

I mean, I doubt if they camped where only cold showers are provided! Cumberland Island isn't a cheap place to hold a wedding. Yes, compared to millions, it would be less expensive but I would not call it thrifty in any way!

[nadinbrzezinski]

2. Spending is what keeps the economy going

it is the lube...

And keynes got it.

[nadinbrzezinski]

3. Kickety kick