NPR logo Is The Crisis In Our Heads?

Is The Crisis In Our Heads?

Partly it is, or it may be. We talked about this a bit on the radio, but the basic idea is that when we're worried about the future we tend to spend less, which can backfire.

Say you don't buy that new car, then maybe the auto manufacturers have to lay someone off, and that someone then can't go hiring your company to do whatever it does. And on and on...

The idea is called the Paradox of Thrift. Paul Krugman, the Nobel Laureate and New York Times columnist, talks about it here.

Some free-market types disagree, arguing "Consumers Don't Cause Recessions." From that link: "My friend Bill Anderson actually derives sustenance from his hatred of Paul Krugman; at lunch one time, Bill skipped a sandwich and instead just bought a New York Times."