Keyne's paradox of thrift is hogwash.

If the occasional person is thrifty, there's no problem.

If everyone is collectively "too thrifty", then we've got a problem, but this isn't the cause of the problem, it's a symptom. What does it mean when everyone is saving? It means that there is some kind of uncertainty or fear which is making people forego current consumption in favor of future consumption. This isn't a natural state of human affairs, since we tend to value things today more than things tomorrow. The extra "thrift" happens because of political or economic uncertainty.

Political uncertainty is fickle, you can't predict it or plan for it. However, saving is the correct response to economic uncertainty, and it's what's responsible for the eventual recovery after a crash.

What you say doesn't invalidate the paradox.

In fact, that is precisely the paradox - that the individually responsible and rational thing (more saving in the face of uncertainty) actually accelerates the problem: an economy crashing down.

Among the policy lessons would be to reduce uncertainty, and encourage consumption (in the economic sense), e.g. via government provided stabilisers (food stamps, unemployment benefits, etc.).

> saving is the correct response to economic uncertainty, and it's what's responsible for the eventual recovery after a crash.

That's a very contentious statement, and personally I'd be rather careful in casually contradicting eminent economists on economic matters.

Which eminent economists? You get two of them in a room and you get three different opinions.

Here's one economics PHd wielding economist refuting the paradox of thrift. http://www.econlib.org/library/Columns/y2009/Murphythrift.ht...

Here's an eminent one refuting it, in case the Nobel prize counts: https://mises.org/library/hayek-paradox-saving

Here's my issue with Keynesians and neo-Keynesians. They have zero concept of capital, it's all about cash flow - spending, saving, debt. They stimulate by printing, temper by taxing, etc.

They ignore the effects of such behavior on capital, and end up amplifying the cycles they try to prevent. This ties into monetary policy and deficit spending as well, but that's way too much of a tirade for Hacker News.

As I said, it's contentious, and Nobel-price-level economists are wrangling with it. That's why I'd be careful making definite statements about it casually. Note that Hayek wrote nearly a decade before Keynes, nearly a century ago, and Keynes has held up remarkably well in the last decade.

The invocation of Say's law strikes me as insufficient to strike down the paradox of thrift.

A liquidity glut is caused by savings exceeding desired investment. A shortage in desired investment is caused by an undersupply of investment opportunities. An increase in the supply of real investment opportunities can be incentivized by subsidizing public inducement prize competitions. The 'stabilizers' you propose subsidize the income of individuals but do not necessarily change individuals preference for savings vs consumption.

Poorer people typically have a lower propensity to save than rich people, though, so redistribution does influence the overall savings rate.

If people are thrifty, so need less money and work less, the economy will be smaller. That's a choice though, not a problem.

If people are overly-thrify, it simply means that there is an under-supply of profitable investment opportunities for them to allocate their savings and labor toward. It is possible to increase the supply of real investment opportunities (investment opportunities which do not depend upon the extraction of "rent" from other investors) through the use of public inducement prize contests. It is possible for government to subsidize the creation of real investment opportunites by raising the nominal value of public inducement prize contest prize pools.

Perhaps we should rethink the under pinnings of our culture rather than continue pushing "excessive material consumption"?

Seems strange to live on the notions of man who lived before today's environmental concerns became cause for alarm.

I'm certainly not advocating conspicuous consumption and needless spending.

However, these individual actions might collectively have unintended consequences, and that's what the paradox of thrift is about. It's a descriptive concept (i.e. about what happens in the real world), not a normative one (i.e. what people ought to do).

But before you decide what one ought to do, it is best to take into account what actually happens in the world.

It might well be better if people spent more (and that need not be on material things, it could be education, concerts, and so forth).

I get you. Keynes is often distilled as, for better or worse, "Go shopping." My jump off point is usually there when talking to folks in meatspace.

But yeah, it could mean spend more on bridges, universities, or jewel studded iPhone cases.

This seems to contradict the purpose of banks. You put your money into banks so that you earn a savings rate on the money while the banks puts it to work in the economy.

Are the piles of money in mattresses really all that much bigger today than they were 30 years ago? Beyond the demographics of the baby boomers, this feels like a non-story to me.