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Comment by ath92 | Hacker News Reader

But if the government redistributes the wealth to its citizens, wouldn't that boost consumer demand and thereby boost economic growth on the demand side?

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Consumption is an important part of the process, without which production has no purpose, but you don't become wealthier just by increasing your spending. Consumer demand is an accelerant, not a fuel source. Boosting it gives you short-term growth at the expense of a long-term decline as you consume the capital that makes efficient production possible in the first place.

What do you mean "consume the capital". What do you think happens to the money that consumers spend?

Capital depreciates at varying rates. I assume by "consume the capital" the parent means allow the total amount of capital in the economy decreases over time because the savings/consumption ratio is not high enough to compensate for the depreciation that occurs.

Yes, exactly. "Capital consumption" is a standard term in economics[1]. A common (if somewhat outmoded) example would be farmers eating their seed corn rather than saving it to plant the next year. In practice it usually looks more like what you described: Productive durable goods like machines or buildings simply wear out and aren't properly maintained or replaced. The total amount of capital investment thus decreases over time.

[1] https://www.economicshelp.org/blog/glossary/capital-consumpt...

Capital consumption just refers to capital depreciation. Reduced capital investment, and more specifically reduced efficient in capital investment doesn't necessarily follow from increased consumer demand. Just stating that it does isn't an argument.

> Reduced capital investment, and more specifically reduced efficient in capital investment doesn't necessarily follow from increased consumer demand.

Of course not. However, the original question was about the government redistributing resources from capital ("the wealthy") to consumers, which would have the direct effect of shifting the balance from capital investment to consumption.

The vast majority of consumer spending will go directly to companies who can invest the extra profit in whatever they want (and going down the chain, their suppliers can invest their extra profit).

The percentage of savings to consumption can go down without the absolute value going down.

Since when have governments ever effectively redistributed wealth to citizens over lining the pockets of cronies and favoured industries?

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