Paradox of Thrift

Steve Scher
01/08/2009 at 9:00 a.m.

This holiday season we all faced a double bind. We're told not to fall into the credit trap: save, save, save. Yet we're also told to spend, spend, spend to support the economy. Much of the U.S. economy is based on sales, retail and finance. Are we still an industrial economy? Or is mass consumption the only way to keep our economy afloat? How can consumers continue to spend in a recession? Can targeted government investment take the place of consumer spending? Economist John Maynard Keynes called it the "Paradox of Thrift" – what's good for an individual isn't necessarily good for the economy. Does that still hold true? We'll talk about it today on Weekday.

Guest(s)

Lew Mandell is a visiting professor of finance at the University of Washington's Foster School of Business. He is also currently a senior fellow at the Aspen Institute, where he is working on the issue of consumer saving and spending, and financial security.

Michael Hudson is president of the Institute for the Study of Long–Term Economic Trends, distinguished research professor of economics at the University of Missouri, Kansas City and author of "Super–Imperialism: The Economic Strategy of American Empire." He is a former balance–of–payments economist for Chase Manhattan Bank and Arthur Andersen.