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I feel like it's a fallacy that things need to be constantly thrown out and replaced for an economy to be healthy. If someone doesn't have to spend $1000 on new

I feel like it's a fallacy that things need to be constantly thrown out and replaced for an economy to be healthy. If someone doesn't have to spend $1000 on new appliances, it's not like that thousand dollars disappears from the economy. Either the person spends that money on something else or sticks it in their savings account and the bank loans some of it out for someone else to spend. (This is basic econ theory, so I'm sure it's a little more complicated than that.) How is it better for an economy when people have to spend money replacing existing things instead of on buying new stuff?

abhishivsaxena 11y ago
Over-saving? Domestic consumption would be lower since savings/investment are higher. Could lead to buildup of inventories, and make existing investment projects non-viable. But I guess in Japan most of the portion of savings goes into international investments, which is good.
bane 11y ago
> If someone doesn't have to spend $1000 on new appliances, it's not like that thousand dollars disappears from the economy. Yes it does. Modern economic systems are built on consumerism. Saving large sums of money acts like a vacuum on currency and brings markets to a halt. Flowing money lubricates the economy. That's basically the sum total of the most recent economic crisis, money wasn't moving, so two presidential administrations through gigantic sums of money at the economy, like spraying it down with WD-40, until it started moving again. > Either the person spends that money on something else or sticks it in their savings account and the bank loans some of it out for someone else to spend. The problem is that in aggregate, if nobody is spending money, it doesn't move around at all. If nobody takes out a loan, then that money just sits in the bank. Sitting money means nobody needs to manufacture anything because nobody is buying anything, which means there's no reason to employ anybody, so nobody makes money. Because times are bad, they save what they have even more and spending continues to go down. Fairly quickly the economy goes into a death spiral, and while plenty of people may have money, there's nothing to spend it on anyway. China is using the same economic trick that's been used time and time again, in the U.S., Japan, other places, to kickstart their economy. It's dumping money into the economy in huge works projects, mostly construction related, and letting that money slosh around. Japan did it in the 80s, but it's no longer working as well as it once did, because pretty much everything they need to build is built, and the population is shrinking so they need even less things.
- seivan 11y ago
  I'm far from an expert but this is from the Keynes camp(?)
- nosuchthing 11y ago
  That theory is based on the assumption that an economy requires consistent purchase of the same products, so in that theory planned obsolescene is great. Yet, the alternative to consumers continuously replacing "old" gear with slightly newer gear is not that a person just deciding they don't want to buy anything and placing that money in savings, they than have money to buy OTHER things, or for entertainment, travel, festivals, trips to mars, adding a 3rd story to their house, et cetera.
  - bane 11y ago
    > they than have money to buy OTHER things, or for entertainment, travel, festivals, trips to mars, adding a 3rd story to their house, et cetera. Believe it or not, there really is only so many other things that people will buy before you start thinking to yourself "hmmm...I'm not using these things at all and they're taking up space, perhaps I should stop buying useless things". It's like my Steam account, hundreds of games I'll never have time to play and I have no idea why I bought them. So I've stopped paying attention to Steam Sales and Bundles. There's only so many appliances, couches, nick-nacks, clothes, electronic goods that you can fit in your house, and only so much time per year to travel. At some point (and this really happens), you just stop buying stuff you don't need to and it just gets piled into various forms of savings.
    - nosuchthing 11y ago
      That's great though, once a person has a considerable savings they invest in new and local businesses or other endeavors, else they simply begin buying more high quality items.
nosuchthing 11y ago
The Parable of the broken window; Have you ever witnessed the anger of the good shopkeeper, James Goodfellow, when his careless son has happened to break a pane of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation – "It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?" Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions. Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier's trade – that it encourages that trade to the amount of six francs – I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen. But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, "Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen." It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented. Frédéric Bastiat, in his 1850 essay "Ce qu'on voit et ce qu'on ne voit pas" (That Which Is Seen and That Which Is Not Seen) https://en.wikipedia.org/wiki/Parable_of_the_broken_window https://en.wikipedia.org/wiki/Parable_of_the_broken_window
- rcthompson 11y ago
  Yeah, that's the passage I was thinking of when writing my comment.

abhishivsaxena 11y ago

Over-saving? Domestic consumption would be lower since savings/investment are higher. Could lead to buildup of inventories, and make existing investment projects non-viable. But I guess in Japan most of the portion of savings goes into international investments, which is good.

bane 11y ago

> If someone doesn't have to spend $1000 on new appliances, it's not like that thousand dollars disappears from the economy. Yes it does. Modern economic systems are built on consumerism. Saving large sums of money acts like a vacuum on currency and brings markets to a halt. Flowing money lubricates the economy. That's basically the sum total of the most recent economic crisis, money wasn't moving, so two presidential administrations through gigantic sums of money at the economy, like spraying it down with WD-40, until it started moving again. > Either the person spends that money on something else or sticks it in their savings account and the bank loans some of it out for someone else to spend. The problem is that in aggregate, if nobody is spending money, it doesn't move around at all. If nobody takes out a loan, then that money just sits in the bank. Sitting money means nobody needs to manufacture anything because nobody is buying anything, which means there's no reason to employ anybody, so nobody makes money. Because times are bad, they save what they have even more and spending continues to go down. Fairly quickly the economy goes into a death spiral, and while plenty of people may have money, there's nothing to spend it on anyway. China is using the same economic trick that's been used time and time again, in the U.S., Japan, other places, to kickstart their economy. It's dumping money into the economy in huge works projects, mostly construction related, and letting that money slosh around. Japan did it in the 80s, but it's no longer working as well as it once did, because pretty much everything they need to build is built, and the population is shrinking so they need even less things.

seivan 11y ago
I'm far from an expert but this is from the Keynes camp(?)
nosuchthing 11y ago
That theory is based on the assumption that an economy requires consistent purchase of the same products, so in that theory planned obsolescene is great. Yet, the alternative to consumers continuously replacing "old" gear with slightly newer gear is not that a person just deciding they don't want to buy anything and placing that money in savings, they than have money to buy OTHER things, or for entertainment, travel, festivals, trips to mars, adding a 3rd story to their house, et cetera.
- bane 11y ago
  > they than have money to buy OTHER things, or for entertainment, travel, festivals, trips to mars, adding a 3rd story to their house, et cetera. Believe it or not, there really is only so many other things that people will buy before you start thinking to yourself "hmmm...I'm not using these things at all and they're taking up space, perhaps I should stop buying useless things". It's like my Steam account, hundreds of games I'll never have time to play and I have no idea why I bought them. So I've stopped paying attention to Steam Sales and Bundles. There's only so many appliances, couches, nick-nacks, clothes, electronic goods that you can fit in your house, and only so much time per year to travel. At some point (and this really happens), you just stop buying stuff you don't need to and it just gets piled into various forms of savings.
  - nosuchthing 11y ago
    That's great though, once a person has a considerable savings they invest in new and local businesses or other endeavors, else they simply begin buying more high quality items.

nosuchthing 11y ago

The Parable of the broken window; Have you ever witnessed the anger of the good shopkeeper, James Goodfellow, when his careless son has happened to break a pane of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation – "It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?" Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions. Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier's trade – that it encourages that trade to the amount of six francs – I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen. But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, "Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen." It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented. Frédéric Bastiat, in his 1850 essay "Ce qu'on voit et ce qu'on ne voit pas" (That Which Is Seen and That Which Is Not Seen) https://en.wikipedia.org/wiki/Parable_of_the_broken_window https://en.wikipedia.org/wiki/Parable_of_the_broken_window

rcthompson 11y ago
Yeah, that's the passage I was thinking of when writing my comment.