A Second Paradox of Thrift: Investment Strategies and the Future
Author(s)
Block, Fred
Abstract
The author presents a second paradox, based on Keynes’ paradox of thrift which showed that increased savings on the part of the rich depressed demand and economic growth. The second paradox explains that risk aversion could reduce the amount of funds available for the productive long-term investments on which the future health of the economy depends. The author now argues that rising liquidity preferences, combined with a shift to intangible forms of investment for increased productivity, weaken the economy’s future capacity. He later suggests some institutional reforms that could reorient economic decision makers to act as though the future matters.
