The Paradox of Thrift
Every family starts saving more. The economy ends up with less saving. How can everyone doing the right thing produce the wrong outcome?
19367 min read
British economics
John Maynard Keynes
1883 – 1946
The most influential economist of the twentieth century. His General Theory of Employment, Interest and Money (1936) overturned classical macroeconomics by arguing that aggregate demand drives output and employment, and that private virtues — including saving — can produce public vices when pursued collectively. The paradox of thrift, the clearest example of this fallacy of composition, became a central teaching device of Keynesian economics. He also made foundational contributions to probability theory and was a key architect of the Bretton Woods international monetary system.