Re: "Is Macroeconomics Believable?"

[Chas Anderson <chasna@xxxxxxxxxxx>]

At 06:22 PM 8/22/98 -0700, you wrote:
>	Charles Anderson joins Ben Bolch in suggesting
>	there is  NO  paradox of thrift  IF  what is saved
>	by one person is in a form to be lent to another
>	(or spent by another if what is saved is invested
>	in equities, etc.).
>
>	One has to agree with this idea for a few people
>	and a few rounds of saving and lending/investing.
>
>	But, as more people save/invest and less money
>	ends up demanding things that people sell for a
>	living, the economic output of a system declines
>	to depression levels.
>
>	The economy that can no longer rely on marginal
>	farming as a stopgap aid in meeting business cycles
>	that destroy debt and then restart, goes 	into severe
>	shock from unemployment and insolvencies.
>
>	Does Charles agree that the best way to make
>	the economy of private frugality bring about full
>	employment and full attention to environmental
>	needs is for government to spend what others save?
>
>	John Gelles

In a modern economy, saving, for all practical purposes, is another way
of spending. Long-term it adds to our productive capacity and lower
prices. Your question assumes that, even in a modern system, that saving
can go to waste, so government must absorb this pool of idle saving
and inject it back into the circular flow.  The question, then, is where
in the system does saving go to waste.

Chas