Talk:Paradox of thrift

message: I want to either remove the sections of Criticism and Austrian Criticism, or at else condense them to their essentials and provide the standard rebuttals. 
To avoid an edit war I will first flag the sections and explain the fallacies here.
But mainly I want to say that the paradox of thrift is logically true. 
: You can say it all you want, but it remains a load of hogwash just like the rest of Keynes' blatherings. 76.103.102.240 (talk) 15:32, 9 May 2011 (UTC)
replies: text:  Wow, now I believe you, anonymous IP, and not the father of modern macroeconomics!  — Preceding unsigned comment added by 63.73.199.69 (talk) 18:16, 5 October 2011 (UTC)
thread_title: POV disputes

message: Second, and perhaps more important, savings represent loanable funds. These funds represent an increase in potential lending and investing by borrowers of the said savings. Among other things, this represents an increase in the supply of such loanable funds that will lower interest rates and stimulate borrowing. So a decline in consumer spending is offset by an increase in institutional (such as banks) lending and subsequent spending.
As long as their is an unmet demand for investment, indicated by high interest rates,  total savings can be increased. The paradox only applies once you reach a point where a further increase in saving, and thus a decrease in consumption, would lead to lower demand for investment. Total savings can not be increased beyond that point.
 This criticism is especially significant because the extreme degree of saving, that would obviously connect saving to hard times, is rare. The aforesaid "saving for a rainy day" is never considered paradoxical. Frantic saving, in the face of a feared recession, on the other hand, may be viewed as the situation that obviously attaches the word paradox to thrift.
Fair enough, but how is this criticism? it is basically an admission that the paradox of thrift is real, but rare.
If currency is hoarded (such as placed under one's mattress) and not converted into profitable investments (such as placed in a bank), a "savings" induced recession may occur. Hoarding currency, however, is a far cry from saving money. [4] A problem with this oversimplified understanding of "hoarding" is that it fails to grasp that hoarding can occur by deposit institutions as well, when interest rates are at a zero lower bound (or near it) and savings still exceed investment demand.
Moreover, the paradox assumes a closed economy in which savings are not be invested abroad (to fund exports of local production abroad). If participants in the closed economy are producing an ever greater amount than is being consumed, leading to increased savings, this can be offset by trading partners consuming a greater amount relative to their own production. Ultimately the planet is a closed economy and the paradox will hold for World GDP, but deviations are permitted at the local and national economic level.
The paradox of thrift is not about hoarding and yes, the paradox assumes a closed economy.  Obviously extra savings can be exported to trading partners in need of capital.Savings represent funds that can be lent out. So higher savings will lower inter- est rates (to clear the market for loans) and stimulate borrowing, thus increasing investment. But when interest rates are already very low, e.g. close to or equal to zero (liquidity trap), then interest rates can fall no further and thus there is no way additional savings can stimulate additional borrowing/investment.
The paradox assumes a closed economy in which savings are not invested abroad (to fund exports of local production abroad), or at least that   do not respond (if assuming an open economy). Thus, while the paradox may hold at the global level, it need not hold at the local or national level: if one nation increases savings, this can be offset by trading partners consuming a greater amount relative to their own production The supposed 'paradox' of savings was attacked by Austrian economist Friedrich Hayek in a 1929 article, "The 'Paradox' of Savings", attacking the paradox as proposed by Foster and Catchings.[5]
The reference is probably junk. If it isn't, could somebody summarize the argument?
-- Here is a summary of the argument, both from Foster & Catchings and Hayek's response: http://mises.org/daily/2804
References are given in the article.
I would strongly support expanding the criticism section (especially the Hayek response) since, at least in my opinion, he clearly proves the errors of this "paradox", and as of now, the article is presenting the paradox as fact... --  —Preceding unsigned comment added by 193.69.10.1 (talk) 11:49, 15 April 2011 (UTC)
thread_title: Non-criticisms

message: "then aggregate demand will fall and will in turn lower total savings in the population."
Shouldn't it be increase savings?  —Preceding unsigned comment added by Ericg33 (talk • contribs) 21:00, 23 January 2009 (UTC)
replies: text:  No, that is why it is the paradox of thrift. Any attempt to increase savings beyond a certain point will lead to economic contraction: unemployment, bankruptcy, etc. Wealth, and thus the value of the total savings, decreases.  —Preceding unsigned comment added by 92.254.77.250 (talk) 23:41, 19 March 2010 (UTC)
thread_title:  Error? 

message: I'm a member of the laity who takes more than a passing interest in monetary matters - but I found this article completely opaque.  Could someone perhaps add a numerical example?  (e.g. "Alice and Bob are the only two consumers, both with savings of £50 which, when combined, represents [e.g. 33%] of cash in the economy.  Alice decides to increase her savings from £50 to £100 and correspondingly [SOMETHING], gaining advantage over Bob.  However, if Bob decides to increase his savings from £50 to £100 as well [SOMETHING BAD HAPPENS] and both Alice and Bob are disadvantaged.".  Without such an example, I can't really follow what on earth the article is trying to say.  7daysahead (talk) 10:26, 5 October 2011 (UTC)
replies: text: I agree; found the overview paragraph incomprehensile (it is a sure sign of writing down when you see words like equilibrium or cetus paribu)
I don't know if the example by daysahead is the rigth way to do ti, but the current paragraph is not good.
I have a PhD in moleuclar biology, and I know how hard it is to think simply sometimes; but please, give it a try (and loose the equilibrium)  — Preceding unsigned comment added by 24.91.51.31 (talk) 00:28, 26 November 2011 (UTC)

text: I've tried to translate bits into plain English, but really, it's a pity an article on such an important subject, one which is debated daily in Congresses and Parliaments, should not be written comprehensibly.Straw Cat (talk) 11:54, 31 January 2013 (UTC)
thread_title:  Very difficult to read 

message: While not being an economist or economics trained myself, I can't believe that Keynesian responses to mentioned criticism's of this Keynes argument are not available.  Surely it is better for the page to refer to how the Austrian school and other criticisms are responded to by Keynesians?  — Preceding unsigned comment added by 94.195.77.185 (talk) 22:15, 6 December 2011 (UTC)
thread_title:  Where is the Keynesian/ NeoKeynesian critique of the critiques? 

message: In a coin-based monetary system, demand for savings = demand for coins = demand for metal intrinsic in those coins. Paradox of thrift is not some obtuse law of economic nature. Rather it is a consequence of a)a policy choice to base the monetary system on something of no intrinsic value (eg bank/debt based money) and b)a conscious choice to avoid mentioning/analyzing why that sort of system breaks down (fraud, bank balance sheet mismanagement, etc) and to instead create a "paradox" that can be scapegoated.  — Preceding unsigned comment added by 50.134.196.115 (talk) 02:30, 10 October 2013 (UTC)
thread_title: Paradox of thrift is a broken banking system 

message: From the article: "This criticism in turn has been questioned by Keynesian economists, who reject Say's law and instead point to evidence of sticky prices as a reason why prices do not fall in recession; this remains a debated point."
This criticism could be question because sticky wages provide a counter-example.  The underlying problem with the criticism, though, is that it has never presented a quantitative mechanism for describing how much labor prices would fall compared with revenue levels nor any explanation as to why these two should fall at exactly the same rate.  Further, they have never provided a time in history where their advice was ignored and the economy suffered.  The closest I have seen is an argument that government meddling was why we were "so slow to recover from the Great Depression", however when you check the numbers, that is the only time in modern history when the US grew their GDP by 10% a year.  I have read several such works and the only proof provided is proof by repeated assertion.  — Preceding unsigned comment added by 70.90.204.42 (talk) 17:58, 5 May 2014 (UTC)
thread_title:  "sticky wages" 

message: I don't claim to be an expert in any way on Keynesian economics, but I do hear this paradox used by many mainstream economists and tv personalities on many business channels.  They always say "If you know what you want to buy will be cheaper later, you will wait to buy it."  This is clearly a statement used for buyers, during deflation.
But that always makes me think, what about sellers, during inflation?  Could one not logically flip this paradox around and ask "If you know you could sell something for more later, you will wait to sell it?"
The paradox of thrift just contradicts itself in the end when you flip it around.  It seems to be an excuse for purposeful inflation more than a real paradox when you think about it logically.
Chistiandoublezero (talk) 17:01, 19 November 2014 (UTC)
thread_title: Flipping it around

message: I can understand the paradox of thrift in the case where I spend an extra $50 per month, and in return for that extra expenditure I get more goods and services (let's say more salmon meals instead of chicken wings). That is an example of increasing economic activity (I am getting better food, and that allows me to be more productive). But it seems to me that current economic policy just wants to focus on rising prices. In other words, if I am forced to spend the extra money just to keep the same level of goods and services as before, then there is not really increased economic activity (I am not buying anything extra for that money). All it means is that I am being impoverished, and Keynes is being used as a smokescreen by those who benefit from such an arrangement.  — Preceding unsigned comment added by 24.79.80.75 (talk) 23:27, 21 May 2016 (UTC)
thread_title: Misapplication of Keynes by current policy makers: Scamjob?

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