What is the Paradox Of Thrift?
The paradox of thrift is an economic theory posited by John Maynard Keynes, a noted 20th century economist. According to Keynes, when people start to save money instead of spending it in response to growing concerns about a recession, they can actually make the recession worse, while the overall rate of savings remains the same. This argument is often used to promote consumer spending in periods of economic uncertainty, and it has led numerous governments to spend heavily during recessions in an attempt to prevent these events from growing worse. The logic behind the paradox of thrift is this: when Person A puts money in the bank instead of spending it, that money fails to end up in the cash register of Business B. Business B, in turn, is forced to lay off workers because fewer people are spending at its establishment. These laid off workers have no spending money, therefore causing other businesses to falter because they start to experience a decline in customers, and over time, the r
