What is the Paradox Of Thrift?

"Paradox of thrift" is a theory popularized by Keynes, although it has been said that the allegorical fables as early as 1714, and similar emotions can be traced back to ancient times, according to Keynesian national income determining theory Changes in consumption will cause changes in national income in the same direction, and changes in savings will cause changes in the national income in the opposite direction. However, according to the theory that changes in national income caused by changes in savings, increasing savings will reduce national income and cause economic recession, which is evil; and reducing savings will increase national income and make the economy prosperous. This contradiction is called "The Paradox of Thrift".

Conservation paradox

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To understand this issue, it is important to note:

its

In studying Keynes's "saving paradox", it is necessary to clarify the premise of Keynes's point of view, to clarify the analysis method used by Keynes, and to clarify the essence of Keynes' point of view. Never ask the premise and apply the conditions everywhere. In particular, as a developing country, China has just entered the stage of a well-off society. The economic strength of the entire country is still relatively weak, and it is impossible to promote the consumption stimulatingly according to Keynesian viewpoints. Let us step out of the frame of Keynes short-term, static, and total analysis thinking, focus on real economic life, switch to long-term, dynamic, and structural analysis, and consider the economic development of tomorrow, and continue to maintain and promote the virtue of economy. As long as the money saved is used for investment and to develop emerging products that meet consumer demand, our lives will become better and better.

When someone advised Keynes to think about things in the long run, Keynes once said impatiently: "From a long-term perspective, we are all dead." Keynes was dead. He can ignore tomorrow, but we are still alive, we must not Regardless of tomorrow. ^[1]