Re: Keynesian economics 101

[Doug Henwood <dhenwood@xxxxxxxxx>]

David Shemano wrote:

> Isn't it Keynesian dogma that the problem with the rich is that they save
> and do not consume (relative to the non-rich), and that the government can
> goose the economy by redistributing wealth from the rich (the savers) to the
> non-rich (the spenders)?  How do Keynesians explain data like this -- the
> national savings rate actually drops when the rich increase their wealth?

There are a lot of problems with the study you're reacting to. It
takes no account of the increase in debt, which has depressed the
savings rate. It uses income quintiles, even though wealth isn't
perfectly correlated with income and even though it's only the top
couple of percent of the (wealth) distribution that holds most of the
stock (making quintiles too broad a measure). I've queried the
authors about this, and their responses aren't terribly impressive.
But a footnote at the beginning said it was written under the
inspiration of Alan Greenspan, so it must be right.

Doug