Comment by javert | Hacker News Reader

Comment by javert | Hacker News Reader

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Overall, the economy only grows and people only get better off when net production expands (or, equivalently, production gets cheaper).

You clearly are espousing some kind of nonsensical demand-side economics that contradicts the above law.

> If your economy is suffering from a shortage of aggregate demand, as ours is, then promoting consumption is a good thing.

There is no such thing as a "shortage of demand." It's a nonsensical idea.

> Lowering taxes on the wealthy, or otherwise favoring investment over consumption, benefits the rich much more than it benefits everyone else.

That is obviously patently false for the reason I already stated. More concretely: A rich person going without an investment (not even tangible) is less of a hit than a poor person going without better food, clothing, shelter, education, entertainment, etc.

> There is no such thing as a "shortage of demand." It's a nonsensical idea.

Eppur si muove. The predictions of demand-side economic models have been largely correct since the 2008 crisis; the predictions of supply-side models have been outrageously wrong.

If a lot of people suddenly decide to consume less (as they have since 2008), then they save more. The money they put into the bank is, ideally, productively invested; that investment creates new demand, and then there's no such thing as a demand shortage.

In that model, you would be right. However, that's not what we actually see. Foregone consumption is not automatically channelled to productive investment. If you own a company, you have no reason to invest in increased production capacity if no one will buy your increased output. And why is no one buying that increased output? It's partly an issue of distribution; the wealthy have a lower marginal propensity to consume.

A lot of people and companies actually are sitting on big piles of cash (or other short-term, low-risk investments that don't do much to increase productive capacity). This is part of the reason why interest rates are so low.

>people only get better off when net production expands

This is a trivially false statement. Just look at any recession in history and you can easily find people who become better off even though net production shrank.

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