This is the paradox of thrift: belt-tightening causes people to lose their jobs, because other people are not buying what they produce, so their debt burden rises rather than falls.
Interpretation
The paradox of thrift suggests that when everyone saves more money, overall economic demand decreases, leading to job losses.
Robert J. Shiller's quote highlights the paradox of thrift, which contends that while individuals may attempt to save money by reducing spending, this collective behavior can have adverse effects on the economy. When consumers cut back on purchases, businesses face lower sales, which may lead to layoffs and increased debt for those affected, ultimately undermining the initial goal of saving money and creating a vicious cycle that exacerbates economic distress.
In practice
Use this quote in a speech about the impacts of consumer behavior on the economy.
Those on the downside of rising economic inequality generally do not want government policies that look like handouts. They typically do not want the government to make the tax system more progressive, to impose punishing taxes on the rich, in order to give the money to them. Redistribution feels demeaning. It feels like being labeled a failure.
Speculative markets have always been vulnerable to illusion. But seeing the folly in markets provides no clear advantage in forecasting outcomes, because changes in the force of the illusion are difficult to predict.
That's the world we live in: when it comes to economics, people have emotions; it's not like chemistry or physics.
Money management has been a profession involving a lot of fakery - people saying they can beat the market, and they really can't.
We should not be focusing on quick solutions. The really important concern for policymakers everywhere is to prevent disasters - that is, the outlier events that matter the most.
If we wait until income inequality is much more severe, we will have a whole class of new superrich who will probably feel entitled to their wealth and will have the means to defend their interest. That's already gone far enough. We shouldn't let it become more extreme.
I cannot disagree with you that having something like 500 economists is extremely unhealthy. As you say, it is not conducive to independent, objective research. You and I know there has been censorship of the material published. Equally important, the location of the economists in the Federal Reserve has had a significant influence on the kind of research they do, biasing that research toward noncontroversial technical papers on method as opposed to substantive papers on policy and results
A global economy is characterized not only by the free movement of goods and services but, more important, by the free movement of ideas and of capital.
When you save the life of anyone, a farmer, a teacher, a mother, they are contributing productively into the economy.
I'm of those who believe that excesses in all matters are not a good idea, whether it's formation of bubbles, whether it's excess in the financial market, whether it's excess of inequality, it has to be watched, it has to be measured, and it has to be anticipated in terms of consequences.
The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.
On the market, all is harmony. But as soon as intervention appears and is established, conflict is created, for each may participate in a scramble to be a net gainer rather than a net loser - to be part of the invading team instead of one of the victims.
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