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Comment by FabHK | Hacker News Reader

What you say doesn't invalidate the paradox.

In fact, that is precisely the paradox - that the individually responsible and rational thing (more saving in the face of uncertainty) actually accelerates the problem: an economy crashing down.

Among the policy lessons would be to reduce uncertainty, and encourage consumption (in the economic sense), e.g. via government provided stabilisers (food stamps, unemployment benefits, etc.).

> saving is the correct response to economic uncertainty, and it's what's responsible for the eventual recovery after a crash.

That's a very contentious statement, and personally I'd be rather careful in casually contradicting eminent economists on economic matters.

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Which eminent economists? You get two of them in a room and you get three different opinions.

Here's one economics PHd wielding economist refuting the paradox of thrift. http://www.econlib.org/library/Columns/y2009/Murphythrift.ht...

Here's an eminent one refuting it, in case the Nobel prize counts: https://mises.org/library/hayek-paradox-saving

Here's my issue with Keynesians and neo-Keynesians. They have zero concept of capital, it's all about cash flow - spending, saving, debt. They stimulate by printing, temper by taxing, etc.

They ignore the effects of such behavior on capital, and end up amplifying the cycles they try to prevent. This ties into monetary policy and deficit spending as well, but that's way too much of a tirade for Hacker News.

As I said, it's contentious, and Nobel-price-level economists are wrangling with it. That's why I'd be careful making definite statements about it casually. Note that Hayek wrote nearly a decade before Keynes, nearly a century ago, and Keynes has held up remarkably well in the last decade.

The invocation of Say's law strikes me as insufficient to strike down the paradox of thrift.

A liquidity glut is caused by savings exceeding desired investment. A shortage in desired investment is caused by an undersupply of investment opportunities. An increase in the supply of real investment opportunities can be incentivized by subsidizing public inducement prize competitions. The 'stabilizers' you propose subsidize the income of individuals but do not necessarily change individuals preference for savings vs consumption.

Poorer people typically have a lower propensity to save than rich people, though, so redistribution does influence the overall savings rate.

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