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Consumption is not the key to economic wellbeing. Deferring consumption is. When you defer consumption and instead invest your resources into enhancing your a

Consumption is not the key to economic wellbeing. Deferring consumption is. When you defer consumption and instead invest your resources into enhancing your ability to produce, you wind up producing more. Consumption beyond subsistence is only possible because of such investments. And its as true for countries as it is for individuals. High levels of consumption are made possible by economic wellbeing, not the other way around. If everybody decides to defer personal consumption at once, they save more and borrow less. That means more savings and lower interest rates. More capital is then available to invest in new businesses, education and other things that create wealth. Of course, that's how it works when government isn't distorting the cost of money and subsidizing consumption. Things are so distorted now, no one can tell which banks are sound or whether housing will rise or fall even more. And all of these uncertainties are a much bigger factor than Facebook.

josh33 16y ago
Agreed. Investment is the machine that moves the economy. Consumption is the natural by-product of people investing in their power to produce more value. When you produce value in the world, the world pays you for it and you are able to by what you want (miracle of exchange and currency). I think you may have been down-voted because you forgot to mention that the investment you refer to is not investing in a 401k or S&P 500 fund. You refer to business spending on capital goods, new technology, entrepreneurship, and productivity. Retail demand grows with wealth. The worry shouldn't be on a future where we don't demand, as demand will always find new products to make scarce. We should rather worry that wealth will be redefined as having things, which will reduce a person's focus from producing to consuming. If we are all worried about consuming more and focus our effort and energy there, we'll stop focusing on producing and will then turn to financing our consumer goods (spending tomorrow's capital today).
- stretchwithme 16y ago
  I think I made it clear I was talking about investing in productive capacity. Why they down vote I leave for them to say. I think people know how much consumption is right for them and how much they wish to invest in their own capabilities. They balance these things all the time. So I don't worry about them. The problems start with government subsidizing consumption like owning bigger houses. Many people actually got deceived into thinking buying such houses was the way to make money. And everything not subsidized must get more expensive
Tichy 16y ago
"Consumption is not the key to economic wellbeing. Deferring consumption is." This statement, as well as "we need to work harder to be better off" never make sense to me. Translated they seem to be equivalent to "we need to be less well off to be better off". Doesn't make sense. (Other translations: "we need to live in a smaller house to live in a bigger house" or "we need to eat less to eat more").
- ovi256 16y ago
  You forgot the temporal scale: now, then. We work harder now to be better off then.
  - Tichy 16y ago
    It still doesn't add up: suppose I earn one piece of chocolate per day. If I defer eating one piece of chocolate today, I can eat two pieces of chocolate tomorrow. On average, I still only have one piece of chocolate per day. So I am not better off. In the same vein, if I work harder today I maybe have more money tomorrow and can afford to work less. But on average, I have still worked the same amount of time as before. So working harder does not make me better off on average (if by "being well off" in this case we take "can afford to not work too much"). What REALLY works is increasing the efficiency of work. We are not well off because we work so much. We are well off because we have machines that do a lot of work that other people still have to do manually.
    - stretchwithme 16y ago
      Increasing the efficiency of work is what we've been talking about. When you defer consumption and use the funds to improve your productive capacity, you are improving the efficiency of your work. I wasn't just talking about not consuming. Sometimes a thought is not complete in the first two sentences of a paragraph. Sometimes the third sentence has to be read too.

josh33 16y ago

Agreed. Investment is the machine that moves the economy. Consumption is the natural by-product of people investing in their power to produce more value. When you produce value in the world, the world pays you for it and you are able to by what you want (miracle of exchange and currency). I think you may have been down-voted because you forgot to mention that the investment you refer to is not investing in a 401k or S&P 500 fund. You refer to business spending on capital goods, new technology, entrepreneurship, and productivity. Retail demand grows with wealth. The worry shouldn't be on a future where we don't demand, as demand will always find new products to make scarce. We should rather worry that wealth will be redefined as having things, which will reduce a person's focus from producing to consuming. If we are all worried about consuming more and focus our effort and energy there, we'll stop focusing on producing and will then turn to financing our consumer goods (spending tomorrow's capital today).

stretchwithme 16y ago
I think I made it clear I was talking about investing in productive capacity. Why they down vote I leave for them to say. I think people know how much consumption is right for them and how much they wish to invest in their own capabilities. They balance these things all the time. So I don't worry about them. The problems start with government subsidizing consumption like owning bigger houses. Many people actually got deceived into thinking buying such houses was the way to make money. And everything not subsidized must get more expensive

Tichy 16y ago

"Consumption is not the key to economic wellbeing. Deferring consumption is." This statement, as well as "we need to work harder to be better off" never make sense to me. Translated they seem to be equivalent to "we need to be less well off to be better off". Doesn't make sense. (Other translations: "we need to live in a smaller house to live in a bigger house" or "we need to eat less to eat more").

ovi256 16y ago
You forgot the temporal scale: now, then. We work harder now to be better off then.
- Tichy 16y ago
  It still doesn't add up: suppose I earn one piece of chocolate per day. If I defer eating one piece of chocolate today, I can eat two pieces of chocolate tomorrow. On average, I still only have one piece of chocolate per day. So I am not better off. In the same vein, if I work harder today I maybe have more money tomorrow and can afford to work less. But on average, I have still worked the same amount of time as before. So working harder does not make me better off on average (if by "being well off" in this case we take "can afford to not work too much"). What REALLY works is increasing the efficiency of work. We are not well off because we work so much. We are well off because we have machines that do a lot of work that other people still have to do manually.
  - stretchwithme 16y ago
    Increasing the efficiency of work is what we've been talking about. When you defer consumption and use the funds to improve your productive capacity, you are improving the efficiency of your work. I wasn't just talking about not consuming. Sometimes a thought is not complete in the first two sentences of a paragraph. Sometimes the third sentence has to be read too.