Well, no. It is one thing to identify a higher national saving rate as the long-term goal, and quite another thing to try to get there overnight in the form of a sudden drop in consumption spending. Here I am v
This example of a fallacy of composition is often called the “paradox of thrift.” Since economists are presumably well aware of the concept of a “fallacy of composition,” it is surprising that they were tripped up by a fallacy of composition in the context of international capital mobility...
What is the paradox of value in economics? What is the Giffen Paradox? How can the paradox of value be resolved? What is paradox of thrift in economics? What is the productivity paradox? What is the paradox of credit? What is the Abilene Paradox? What is conditional convergence theory...
The paradox of thrift can also be explained if investment is induced rather than autonomous. This is illustrated in Fig. 5. The investment curve I slopes upward and intersects the S curve at point E where T level of income is determined. Suppose people increase their savings ...