In another thread, various posters opined that economic recovery is a long ways a-coming.
That raises another question. In your opinion, what can the average citizen do to help the economy along?
Buy stuff! I suggest a PlayStation2 and Grand Theft Auto III (and pre-order Vice City).
CONSUME
OBEY
Well yeah, but I was hoping for something other than “Buy stuff!” Where should Joe Sixpack be investing his money, for example? I don’t think many people would be willing to spend their money, simply to boost the economy.
Elwood: hmm… good thing I bought these special sunglasses.
As for the subject at hand; educating yourself in the rudiments of wise investing and then applying that knowledge will certainly help restore confidence in the stock markets and give a push to continued technological innovation and economic recovery.
There is nothing more silly than the idea that if we simply all buy stuff from each other, we’ll somehow be richer.
When you buy a Playstation, you help the retailer, but you hurt other consumers of Playstations by exactly the same amount (since your purchase means there must needs be one less new Playstation in the world for them to buy retail, incrementally raising prices for everyone else).
Net change? You have a Playstation instead of some cash. So, only buy the Playstation if that’s what you want. Otherwise, don’t. The only simple way your purchase helps “the economy” is if it makes you personally happier to have a Playstation instead of cash or savings or something else.
Investing, even intelligently, is not likely to “help the economy” either, for some of the same sorts of reasons. Overinvesting is not a boon: it’s partly what got us into this mess in the first place.
The short answer is that the average citizen cannot do anything to help the economy along, purely because of the fact that they are an average citizen! If everyone followed the same average strategy to “help the economy” it would lead to incredible ruin. Luckily, most people don’t waste too much of their money trying to “help the economy”: and instead do what’s already best: make the choices that are sensible to them, given their finances and preferences.
This is not true. Retailers and producers of Playstations will continue to offer them at exactly the same price as you bought yours up until the point when their marginal cost curve exceeds their income curve. What’s more, as other technology supercedes that of the Playstation, the price will continue to fall regardless of how many you buy. Prices will only rise in the event of a true shortage, where producers or retailers are physically unable to meet demand.
That, plus the fact that when Sony (the producer of the Playstation) realizes there is a shortage, they will respond by ramping up production of more Playstations to alleviate the shortage, since it is in Sony’s best interest to sell more Playstations.
i tried to look up “disposable income” in an accounting book. it wasn’t there. the masses aren’t supposed to understand accounting or economics. they want most of us to be dumb.
read:
YOUR MONEY OR YOUR LIFE by Joe Dominguez
the economy has been in trouble for years, bankruptcies have been trending upward since 1985. we just aren’t told theright statistics
Just because there are more bankruptcies now than there were 20 years ago does not mean that the standard of living hasn’t increased over the same time period.
dal_timgar, accounting isn’t economics - you need to see a macro economic text book. There you will find a variety of definitions of income.
pldennison, small point here, but price discrimination would allow Sony/retailers to capture more revenue and profit, even though it might be “illegal”. By selling through different channels (big box retailer versus a toy store with different prices), offering discounts ($25 if you purchase today), other marketing programs such as rebates, etc., you have ways of capturing more of the demand curve. My marginal propensity to consume a Playstation relative to other goods doesn’t kick in at $300/unit, but might at $200/unit.
For the original OP, no not much an individual can do to the macro economy. $12 trillion isn’t going to be affected by the typical $50,000 household changing it’s behavior.
Actually, there is one way the ordinary citizen can help the economy - be more productive.
So feel free to volunteer to work some overtime, work harder and smarter, educate yourself at night so you can be more effective at your job.
Yeah…that’s it. :rolleyes:
For anyone else in the “ignorent masses” who wants to know what ‘disposable income’ is:
http://www.investorwords.com/cgi-bin/getword.cgi?1491
disposable income-
The amount of income left to an individual after taxes have been paid, available for spending and saving.
discretionary income-
The amount of an individual’s income available for spending after the essentials (such as food, clothing, and shelter) have been taken care of.
Although the terms are often used interchangeably.
re: YOUR MONEY OR YOUR LIFE by Joe Dominguez
http://www.newroadmap.org/money-ymoyl-summary.asp
“Joe Dominguez was a successful financial analyst on Wall Street before retiring at the age of 31”
Haven’t read this particular book, but I’m familiar with the genre. Basically you have a rich Wall Street guy who made enough money to live comfortably withour working and/or just got sick of the rat race to make Partner or MD in his firm and decided to retire and write books.
Problem is, like Apos said, if everyone quit their jobs and wrote books on how much work sucked, there wouldn’t be anyone producing anything.
Of course. I don’t think anyone believes that your typical, Joe Schmoe individual can turn the economy around by himself.
However, the OP asked what each individual can do to HELP the economy along. A single individual might not change things, but what can we do as a whole?
Playstation is perhaps a bad example, as you note, because it is a monopoly product, and the channels are a lot more complex. However, the point remains exactly the same. You can’t help the economy simply by buying things you wouldn’t otherwise have chosen to buy.
I think tracer already identified one reason why that’s not necessarily so. If increased consumption leads to increased production, then all things being equal, this should indeed constitute a boost to the economy.
Note that I say “all things being equal,” as there are many other factors to consider (the manufacturer’s ability to adjust to increased demand, for example).
—If increased consumption leads to increased production, then all things being equal, this should indeed constitute a boost to the economy.—
Only if you count only some things and not others. And since when is overproduction a boost to the economy? It brings with it it own problems. If you want to help people that produce certain goods: buy those goods. But for goodness sakes: all that means is that you’ll have to spend less money elsewhere in the economy, or elsewhen, reducing demand THERE. All you’ll end up doing is distorting the market even more from what your real preferences and expectations are.
Not if people end up owning things they don’t want. The point of an economy as a whole is to support consumption, not just some particular activity like goods production to the exclusion of other activities. If you want a Playstation, buy it. But not at the expense of saving for your child’s college education, if you happen to care about that more.
I’m not trying to be defeatist here. But the fact is, almost no economist thinks there is any good simple advice to give people on how to help the economy other than planning sensibly, spreading out damage of things like debt over the long term, and making sure that you spend your money on the things that really matter to you.
In fact, there’s good reason to think that telling people to do some particular thing to help the economy would almost inevitably be counterproductive. Tell everyone public to buy goods, and they’ll underinvest, or deplete their savings faster than they should have. That last thing ANYONE should want for an economy is for everyone to start artificially doing the same things. Diversity of perferences and difference in actions are good for a big economy: distorting that would prove far worse than anything else imaginable.
That’s a strawman argument. “Increased production” is NOT the same as “overproduction.” Not by a long shot.
For pity’s sake.
If someone’s income is extremely restrictive, then YES, spending one place would mean spending less elsewhere. Common sense dictates that it’s not true for everyone though.
As for the “elsewhen” clause… that’s only true if the economy DOESN’T change. It simply doesn’t follow that spending $10 now means spending $10 less somewhere down the road. Economics just ain’t that simply.
Apos, a moment ago, I pointed out that it’s wrong to equate “increased production” with “overproduction.” Obviously, the two terms do not mean the same thing.
I think a similar fallacy can be found in one of your earlier statements:
Again, you’re equating two non-identical terms. Common sense dictates that “Intelligent investing” is NOT the same as “overinvesting.” It seems to me that by repeated use of the “over-” prefix, you’re implicitly assuming what you seek to demonstrate.
Y’know, I don’t think anyone here has advocating buying things that we don’t want. In fact, having reviewed the entire thread, I’m pretty darned sure of it.
I think that’s an example of the fallacy of the excluded middle. Obviously, our choices are not limited to just “buying stuff we don’t want” and “buying only what we would have purchased anyway.”
—That’s a strawman argument. “Increased production” is NOT the same as “overproduction.” Not by a long shot.—
If they are producing things that people don’t really want, simply because of a temporarily inflated demand, then yes, it is.
—If someone’s income is extremely restrictive, then YES, spending one place would mean spending less elsewhere. Common sense dictates that it’s not true for everyone though.—
Common sense dictates that there’s only so much wealth in the world. Whether your wealth is restricted or not, you’re doing SOMETHING with that wealth, which is just as much part of the economy as everything else. Even if you turn it into cash and sit on it.
Which is actually interesting in an of itself: because by doing that you CAN help the economy: at an exactly offsetting cost to yourself (which, if your motives are altrustic to begin with, should be acceptable to you). By simply sitting on cash (or burning it, so you can never spend it) you do a glorious thing: you take your personal claim on wealth (that you presumably made by engaging in productive activity) and you don’t claim any of it. Essentially, you would be giving up your legitimate claim on that particular share of the worlds goods: granting a gift to everyone else. Of course, that gift is incredibly small: but you already agreed that even tiny moves are worth it.
—It simply doesn’t follow that spending $10 now means spending $10 less somewhere down the road. Economics just ain’t that simply.—
Actually, spending 10$ now means spending MORE than 10$ later. But I’m still not sure where you’re drawing all this extra wealth out of. If you simply go out and burn a 10$ bill (or buy something you don’t want), then your lifetime consumption is reduced by 10$, forever, no matter what else happens. That you might make 10$ more later is beside the point: you still have 10$ less than you would have had.
—Common sense dictates that “Intelligent investing” is NOT the same as “overinvesting.”—
Putting more money into something than you think it’s actually worth IS overinesting. This is exactly what’s being proposed: instead of making the soundest economic decisions one can make (which DOES help the economy, always), it is being suggested that people invest or spend or whatever, more, simply to “help the economy.”