Macro-Economic Follies

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:

You can read more on the topic at EconStories.tv.