Listener Questions: Consumption & A New Curriculum : Planet Money Today we answer listener questions: why is so much consumption necessary for a healthy economy (or as our listener put it — why do we have to buy so much crap for the economy to be healthy?). Plus, what are some good economic resources for teenagers?
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Listener Questions: Consumption & A New Curriculum

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Listener Questions: Consumption & A New Curriculum

Listener Questions: Consumption & A New Curriculum

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Hey, everybody. This is THE INDICATOR from Planet Money. And for the first time in a few weeks, Cardiff is back.



VANEK SMITH: It's us again.

GARCIA: Yup, that's right. We're back. But unfortunately...

VANEK SMITH: More specifically, you are back from vacation.

GARCIA: Yeah. And I have no idea what's been going on. I've been in the bush for a couple of weeks.

VANEK SMITH: You look very happy and well-rested.

GARCIA: Yeah. By in the bush, I mean I've been sitting by the pool (laughter).

VANEK SMITH: I do not look happy or well-rested, but that's fine.

GARCIA: You look terrific.

VANEK SMITH: It's very nice to have you back, Cardiff.

GARCIA: And what we're going to do today is answer some listener questions just to gently ease our way back into the routine.

VANEK SMITH: (Laughter) We don't want to throw Cardiff into the deep end right now.

GARCIA: Exactly. We like to do this every once in a while. Listeners send us some great questions, and we try to answer them.

VANEK SMITH: So today on the show two - listener questions. First, why does the economy need people to buy so much stuff for it to be healthy? Second, what are some of the good ways to teach high-school students about economics? And, of course, you know, the basics of economics - they're not just for high-school students.

GARCIA: They're for everyone, really.

VANEK SMITH: They're for the high-school student in all of us.


VANEK SMITH: I know. That went to a dark place.

GARCIA: (Laughter).


VANEK SMITH: Our first question comes from Amy Tisdale (ph) in Colorado.

AMY TISDALE: You often say on the podcast that the U.S. economy is driven by consumer spending. How'd we get to a point where we all have to buy a lot of crap to have a healthy economy? Is there any hope of ever being able to break out of this cycle, or are we just doomed?

VANEK SMITH: I love this assessment of our economy.

GARCIA: Yeah. Amy, thanks for that question.

VANEK SMITH: (Laughter).

GARCIA: We always appreciate any chance to include the phrase, buy a lot of crap...


GARCIA: ...On the show - layman's terms.

VANEK SMITH: We do buy a lot of crap.


VANEK SMITH: Like - and the U.S. buys, like, the most crap of anyone in the world. The whole world kind of runs on us buying crap.

GARCIA: On buying crap - yeah.

VANEK SMITH: It's true.

GARCIA: And the answer to Amy's question is surprisingly complicated. But in our response on this episode, we are going to try to take a more explanatory and a less judgy (ph), you might say, approach to consumption.

VANEK SMITH: Sure, like buy a lot of stuff.


VANEK SMITH: (Laughter).

GARCIA: More explanatory, less judgy should be the show's new tagline. It's what we do on THE INDICATOR. Yeah.

VANEK SMITH: Sometimes, we're judgy.

GARCIA: Yeah, it's true.

VANEK SMITH: You're judgy sometimes.

GARCIA: Withdrawn - that's not true at all.

VANEK SMITH: (Laughter) I'm never judgy. So let's just start with, you know, some basics. When you make money from your job, you only have two choices for what to do with that money - just two. You can spend it. That is consumption; buying a lot of crap - or you can save it. And in a healthy economy, both consumption and saving are important. But they're important for different reasons. So let's look at spending first. When you choose to spend money, you're not just getting a product that you want or that you need. You're also providing the business that made the product with a reason to exist - the all-important raison d'etre for businesses.

GARCIA: (Laughter).

VANEK SMITH: It's true though, you know? And that also gives the business a reason to employ workers. I mean, if you think about it, if people suddenly stopped buying cars, you know, there would be no need for auto engineers or auto factory workers or auto mechanics or gas stations or all kinds of businesses.

GARCIA: Yeah - so far, so obvious.

VANEK SMITH: People who make the fuzzy dice - totally out of business.

GARCIA: Exactly - so far, so obvious. Without at least some consumption, there would be no businesses. In fact, there'd be no economy at all.

VANEK SMITH: Crickets.

GARCIA: But too much consumption, too much spending is also a problem because if people are spending too much of the money they make or if they are borrowing money even to buy things they can't really afford, then it makes the economy more vulnerable to a really bad recession.

VANEK SMITH: And the reason for that is simple. So let's say you owe a lot of money because you took out, you know, a car loan or a really big mortgage, and you just don't have that much money saved. Then you're going to be afraid to spend any more money if the economy starts looking shaky because you'll be worried about not being able to pay off your debts if you lose your job or you'll be worried that you won't have enough money saved to get you through the hard times. And the risk is that if too many people have big debts to pay, then, at some point, everyone will stop spending money at the same time. And if that happens, then businesses will not be able to sell the stuff they make. They'll start laying off workers, and then even more people will suddenly stop spending. And the economic downturn will get worse and worse and worse.

GARCIA: Yeah, a vicious cycle - so, yeah, you want people to save money when the economy is doing well. Savings help support the economy when the bad times arrive. But that's only one of the benefits of people saving money. Saving money is also what lets people build enough wealth for retirement. Plus, the money that people save is actually necessary to fund some parts of the American economy.

Consider it this way. When you save money, you probably don't stick that money in a mattress. You might invest it in the stock market through your 401k, which can then give companies a way to expand their operations, or maybe you'll buy Treasury bonds, which fund the American government when it needs to borrow money, or maybe you'll just put the money into a bank. And that makes it easier for the bank to loan out money to companies that need to borrow it. So to sum things up, it's a balance. For a healthy economy, you need plenty of consumption because it keeps businesses going, and it gives people opportunities to work at those businesses. And you also need people to save money because that makes the economy healthy for the longer term.

VANEK SMITH: So where are we right now? Does the U.S. economy have the right balance between consumption and saving? Are people spending too much money, or do they have enough saved to support the economy if it starts to slow down? Sadly, there is no one perfect indicator that can answer this question, but here's what we do know. U.S. households do seem to be in much better shape than they were just before the last big recession, the one that ended 10 years ago. The overall personal savings rate in the U.S. - that is how much people have saved of their income after taxes - is now twice as high as it was back then.

GARCIA: Yeah, plus the debt of U.S. households as a share of the overall economy has continued to fall throughout this recovery, and these are generally good signs. They suggest - cross your fingers here.


GARCIA: Knock on wood - that if the economy goes into recession soon, that recession won't be as horribly severe as the last one or, at least, that households won't suffer quite as much.

VANEK SMITH: Thanks for your question, Amy. And our next question comes from Christopher Acedo (ph). And he writes in and asks this. He says, I am teaching a high-school economics course next fall for the first time. That's so cool. And I was wondering if you have any advice or suggestions. Are there sites, organizations or books that you would recommend that are geared for teenagers?

GARCIA: Thanks, Christopher - and a quick caveat, by the way, that Stacey and I are not professional educators, so whoop.

VANEK SMITH: Unprofessional educators (laughter).

GARCIA: Totally unprofessional - non-professional.

VANEK SMITH: Non-professional.

GARCIA: Anyways, an amateur response, if you will - but we'll start with a couple of free options. First, the New York Fed has resources that were made for both middle-school and high-school educators. They even include a series of comic books, including one called "Once Upon A Dime," with a D.

VANEK SMITH: It's very cute.

GARCIA: It is cute.

VANEK SMITH: It's really cute.

GARCIA: Plus, it has lesson plans. And I'll be honest - haven't checked those out, but that might be one place to start.

VANEK SMITH: It's the New York Fed, so you know it's fun.

GARCIA: Exactly. Wait. What? (Laughter).

VANEK SMITH: The other free option is something called the CORE econ textbook. It is entirely online, and it's an attempt to teach introductory economics with a bigger emphasis on what's happening in the real world, rather than all the abstract theories and equations and things like that. And it also has workshops and resources for educators as well. And we will link to those resources at if you want to see more.

GARCIA: And finally, there are podcasts, which, for obvious reasons, we think are great for students.

VANEK SMITH: There's one brilliant one called THE INDICATOR.


VANEK SMITH: We highly recommend you subscribe.

GARCIA: Time to goose those downloads. And if you already found us, then, hopefully, you also already know about our wonderful sibling podcast Planet Money. But just this once, we're also going to shout out some competitors that you might like.

VANEK SMITH: We're so generous.

GARCIA: Yeah. The gang at Marketplace does a daily half-hour show that's great and easy to understand. Plus, there's the longer Freakonomics Radio podcast, which comes out every couple of weeks. And finally, a friend of the show, Tim Harford - he has a podcast for the BBC. It's called "50 Things That Made The Modern Economy," and it's now in its second season. So check all of those out, but only after you download and listen - twice - to THE INDICATOR.

VANEK SMITH: Yeah, you should probably - at least twice.


GARCIA: This podcast was produced by Darius Rafieyan, edited by Paddy Hirsch and fact-checked by Emily Lang. THE INDICATOR is a production of NPR.


GARCIA: When the economy is doing well - what was that? So, yeah, you want people to save money...

VANEK SMITH: It was your inner high-school student.


GARCIA: (Unintelligible) - that was my inner prepubescent Cardiff coming out, yeah.

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