From: fcrary@ucsu.Colorado.EDU (Frank Crary)
Newsgroups: alt.politics.clinton,alt.politics.democrats.d,alt.politics.elections,ba.politics,co.politics,ne.politics,nj.politics,or.politics,ny.politics,talk.politics.misc
Subject: Re: income vs. consumption (was Re: VOTE, BABY, VOTE!)
Date: 17 Nov 92 18:10:22 GMT
Followup-To: alt.politics.clinton,alt.politics.democrats.d,alt.politics.elections,ba.politics,co.politics,nj.politics,ny.politics,talk.politics.misc
Distribution: usa
Organization: University of Colorado, Boulder

Follow-ups directed away from or.politics and ne.politics, as requested 
in e-mail.

In article <1992Nov16.213454.6500@cbfsb.cb.att.com> mbb@cbnewsb.cb.att.com (martin.brilliant) writes:
>> .... All things considered, 
>> I have no idea what connection exists between our economic
>> problems and savings/investment. I also don't think "expert"
>> economists have any idea either.

>I have a few ideas, and am testing the waters with them.  Expert
>economists have more ideas, but those ideas have not resulted in
>general agreement on successful public policy.

I guess, "don't have any idea" was too strong. They don't have any
ideas that they can confidently say will work and will not produce
equally bad side effects. (E.g. by "no idea" I meant "no demonstrably
correct idea")

>> That presumes that low consumption is the problem. That _might_
>> be the problem, but it also might not. (Also, it isn't clear how 
>> you "encourage" consumption. Usually a "lack of confidince in the
>> economy" is given as a reason, and I don't see how this can be
>> altered by economic incentives.)

>I don't presume that low consumption is the problem, I infer it from
>the price of money.  

However, for reasons we both seem to agree on ("investor confidence", to
use your term, and the policies of the federal reserve), the price
of money may not accurately reflect it's availablity.

>And when I read "lack of consumer confidence," I
>translate that as "lack of money to buy things."

I'd translate it as "an unwillingness to spend money" (which can mean
an inclination to save, instead of a lack of money.)

>Translated that way,
>it usually makes sense.  If that's true, then giving money to the poor
>and lower middle class will increase their confidence - that is, they
>will go out and buy the things they wanted but couldn't afford.

>Of course it's a little more complicated: some people have jobs and
>money now, but aren't sure they will have jobs in the future, so they
>don't take on large credit purchases or use up their savings.  But
>that really isn't very different from not having money - they're
>afraid they can't afford to buy what they want.

I think that is very different from not having money: Giving such people
more money wouldn't cause them to spend more (since they are already
worried about the future, and think saving up what they have is
a good idea.) It also isn't clear to me which of these two groups has
the greater effect on the economy: Those without money to spend
or those who prefer to save. You seem to be assuming that the first
group dominates, and the second is just a minor complication.

>I say "trickle-down" economics is founded on the opposite presumption,
>that is, that low investment is the problem, not low consumption.  Of
>course we have both, but the question is: which is the cause, and
>which the effect?  I look at the price of investment money, and I find
>it going cheaply.  Therefore I say the demand for investment money
>must be low, and the supply high, and therefore the problem is not
>lack of money for investment, but lack of money for consumption.

Or other factors that artifically lower the availability of credit.
(See above.)

                                         Frank Crary
                                         CU Boulder
Newsgroups: alt.politics.clinton