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Most of the kind of wealth that can be consumed by consumers is stuff that takes real energy and resources to produce, transport, and dispose of. As for thrift

by tc 16y ago

Most of the kind of wealth that can be consumed by consumers is stuff that takes real energy and resources to produce, transport, and dispose of. As for thrift, I subscribe to the notion that it's a virtue, and I reject the supposed paradox. We're not going to settle that in this thread, though. That argument has been going on for a hundred years. The Wikipedia page covers the history.

barrkel 16y ago
But the energy (as measured in joules) and resources (as measured in mass of raw materials) are not normally a large part of the costs of a good. They are substantial for some goods, but many goods increase in value the less resources they require, as more efficiency requires more technology, etc. I also think you'll have a harder time arguing your case with consumption of services, which is the growing part of our spending these days. Re thrift, I'll only add that it's plain that if everyone saved all their money, the economy would collapse; there must be a continuum along that line; and that there seems to be a plausible story about increased savings resulting in a build-up of underemployed capital, which in turn starts getting used for less and less productive investments.
- kiba 16y ago
  Saving simply means that time preferences are shifted toward the long term. Someday you're going to use that saving in one form or another. In other words, saving rates is the tradeoff of future goods over present goods. Beside, capital goods needs to be maintained, replaced, or improved over time. That will cost some money. If you don't have any saving, you can't proceed to invest in capitals. Think about it. Saving 10 arrowheads and wooden shaft every weeks mean you will have an ample supply of arrowheads for hunting if you broke one of your arrows. It also allow you to focus on investing in new technology, such as steel arrowheads because you don't have to worry about constantly running out of arrows for hunting while trying to figure out how to make steels.
  - barrkel 16y ago
    No, saving isn't that simple. Saving normally means you put it in a bank or similar entity; the bank then tries to invest that - i.e. loan it to someone who will spend it, and make payments based on profit from that spending. So saving should "simply" mean switching from one kind of spending today for another today. My point about everyone saving is that it includes even the people that the bank would try to lend to, leading to the bank having a bunch of money and struggling to find a profitable place to put it. Unwinding savings is a different issue, because things change over time, and it's hard to predict the future. There may have been inflation, and that money is worth less, or vice versa. If everyone has been saving, and they all try to spend those savings at the same time, they'll find that their savings are worth much less than they expected, owing to the excess supply of money, which will decrease its value. Money really isn't like arrowheads or wooden shafts. If you think of the economy as a series of interconnected flows, such as an intricate water machine with pumps, pipes and reservoirs, money is like the water in the pipes flowing from one place to another. It's just an agreed medium by which we can transmit wealth from one place to another. But it's dangerous to think that you can hoard it, and rely on it holding its value in the long term. Nothing is guaranteed about value in the long term. Indeed, mass hoarding of money would likely depress the economy, owing to deflation from the reduced supply of money, and hence leave everyone worse off down the road. Mercantilism really isn't a good policy, as the Spanish found out a few hundred years ago: http://www.economictheories.org/2008/08/mercantilism-in-spain-spanish.html http://www.economictheories.org/2008/08/mercantilism-in-spai... If you consider the Euro bloc economy en masse, it's a bit like it's using old-fashioned specie money. Looked at from this angle, the article is more or less arguing that Germany ran into the mercantile trap, where running a surplus and encouraging exports was considered a good thing, but turned out otherwise. But mercantilism is long out of fashion for good reasons.

by tc 16y ago

barrkel 16y ago

But the energy (as measured in joules) and resources (as measured in mass of raw materials) are not normally a large part of the costs of a good. They are substantial for some goods, but many goods increase in value the less resources they require, as more efficiency requires more technology, etc. I also think you'll have a harder time arguing your case with consumption of services, which is the growing part of our spending these days. Re thrift, I'll only add that it's plain that if everyone saved all their money, the economy would collapse; there must be a continuum along that line; and that there seems to be a plausible story about increased savings resulting in a build-up of underemployed capital, which in turn starts getting used for less and less productive investments.

kiba 16y ago
Saving simply means that time preferences are shifted toward the long term. Someday you're going to use that saving in one form or another. In other words, saving rates is the tradeoff of future goods over present goods. Beside, capital goods needs to be maintained, replaced, or improved over time. That will cost some money. If you don't have any saving, you can't proceed to invest in capitals. Think about it. Saving 10 arrowheads and wooden shaft every weeks mean you will have an ample supply of arrowheads for hunting if you broke one of your arrows. It also allow you to focus on investing in new technology, such as steel arrowheads because you don't have to worry about constantly running out of arrows for hunting while trying to figure out how to make steels.
- barrkel 16y ago
  No, saving isn't that simple. Saving normally means you put it in a bank or similar entity; the bank then tries to invest that - i.e. loan it to someone who will spend it, and make payments based on profit from that spending. So saving should "simply" mean switching from one kind of spending today for another today. My point about everyone saving is that it includes even the people that the bank would try to lend to, leading to the bank having a bunch of money and struggling to find a profitable place to put it. Unwinding savings is a different issue, because things change over time, and it's hard to predict the future. There may have been inflation, and that money is worth less, or vice versa. If everyone has been saving, and they all try to spend those savings at the same time, they'll find that their savings are worth much less than they expected, owing to the excess supply of money, which will decrease its value. Money really isn't like arrowheads or wooden shafts. If you think of the economy as a series of interconnected flows, such as an intricate water machine with pumps, pipes and reservoirs, money is like the water in the pipes flowing from one place to another. It's just an agreed medium by which we can transmit wealth from one place to another. But it's dangerous to think that you can hoard it, and rely on it holding its value in the long term. Nothing is guaranteed about value in the long term. Indeed, mass hoarding of money would likely depress the economy, owing to deflation from the reduced supply of money, and hence leave everyone worse off down the road. Mercantilism really isn't a good policy, as the Spanish found out a few hundred years ago: http://www.economictheories.org/2008/08/mercantilism-in-spain-spanish.html http://www.economictheories.org/2008/08/mercantilism-in-spai... If you consider the Euro bloc economy en masse, it's a bit like it's using old-fashioned specie money. Looked at from this angle, the article is more or less arguing that Germany ran into the mercantile trap, where running a surplus and encouraging exports was considered a good thing, but turned out otherwise. But mercantilism is long out of fashion for good reasons.