An Interesting Concept Called the “Paradox of Thrift”

Paradox of Thrift
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Paradox of Thrift
Human beings are known to panic fast, and while in panic mode, most people often resort to defensive measures. The same thing happens when people are worried about their future. When news of a dwindling economy spreads, people tend to save more and spend less. Subsequently, a country’s consumption is reduced. According to Posner (2009), consumption propels the economy, and when people decide to lower their consumption, the impact on the economy is negative. Consumption is directly proportional to the number of jobs that a country offers as well as consumer demand. Mulligan (2009) agrees with Posner and says that when consumption is low, the economy is often experiencing its worst times.
However, despite Mulligan and Posner’s articulation of the concept at hand, I do not agree with the notion that the economy will suffer. According to Vermann (2012), the paradox of thrift is not permanent or long-term but only happens for a short period. Both of these authors agree that when people withhold their money, the recovery proc...