Thursday, December 04, 2008

It Is Not Your Duty to Spend

My colleague Art Carden wrote  a great editorial on Christmas and consumption. On NPR a couple weeks ago I heard a discussion of consumer spending, and one of the panelists (I wish I could remember a name or the name of the show) suggested that it makes about as much sense to "spend to save the economy" as it does to say that we should all eat cholesterol-rich diets to make sure that cardiologists stay employed. 

Over Thanksgiving a family member asked if we should be spending in order to stimulate the economy. It's frustrating to me that so many people seem to be pushing the view that consumption for consumption's sake is patriotic. There was an editorial in the Tennessean recently exhorting people to spend. I suppose one could argue that there is a sort of prisoner's dilemma in Aggregate Demand falling (if we both spend we could avoid recession, but if you don't spend and I do, then we enter recession and now I'm even poorer than I would have been if I had just saved), but trying to persuade people individually to carry on as usual seems about as productive as telling people to reduce their individual greenhouse gas emissions. 

My advice: Be thrifty. Don't buy for the sake of buying. Do not buy because someone tells you it is your duty. Buy when you see a really good deal on something you need and you can afford it. Frivolous spending on things you don't really want is a waste of resources. This may sound obvious, but the fact that some people exhort us to spend, and some of us listen, suggests that my advice isn't completely trivial.