Every year, especially around Thanksgiving and Christmas, we hear the mainstream media tell us how important consumer spending is for our economy – after all consumer spending is 70% of our economy.
So by that logic, consumption is good and savings must be bad, right?
Well maybe if you’re a Keynesian economist.
But if you follow Adam Smith or Hayek, you believe that increased productivity leads to more wealth. Forced spending just leads to improper allocation of resources.
Here’s a fun explanation, in tune with the Christmas spirit:
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You can read more on the topic at EconStories.tv.