Glamor Economics

Chapter 3

Chapter 1 Section 2 The Parable of the Bee: An Economist's Alternative Perspective
Economists have always been known to look at the world rationally.In this way, one advantage is that they can see a more real side of things, although sometimes their ideas are so alternative in the eyes of tradition. In the 18th century, the British doctor Mendyville wrote "The Fable of the Bees" to describe the rise and fall of a bee colony.

A swarm of bees spends a lot of money in pursuit of a luxurious life, and the colony quickly prospers.Later, a person of insight stood up and said, "Brothers, what a waste of resources we are spending so much, it shouldn't be!" The bees thought it was reasonable, so everyone ate less and used The cost is also saved, and the expenditure is immediately much smaller.However, everyone does not work so hard every day, because they don't have to earn so much.Before long, the thriving bee colony became lifeless and gradually declined.

As the bees change their habits, they abandon luxury in favor of frugality, and the result is the decline of the colony.The subtitle of the book is "Private Sin, Public Good," meaning that waste is a "private sin" but can stimulate the economy and become a "public good."This work was judged by the court as "a scum work that hinders the public's hearing and hearing", but more than 200 years later, the British economist Keynes was inspired by it and proposed the "paradox of thrift".As we all know, frugality is a virtue. Since it is a virtue, why is there a paradox?This is the unique way that economists look at the problem.

Keynes gave a convincing economic explanation for the stagnation of the British economy in the 20s and the widespread overproduction and severe unemployment in the world in the 20s.He believes that from a microscopic analysis, a family can often become rich if they manage the house diligently, reduce waste, and increase savings; Decline in sales → reduction in production scale of manufacturers, increase in unemployed population → decline in national income, decline in personal disposable income of residents → decline in total social consumption expenditure... In January 30, he asserted on the radio that frugality would lead to a "vicious circle" of poverty, He added: "If you save five shillings, it will put a man out of work for a day."

The paradox of frugality tells us that frugality reduces spending, forcing manufacturers to cut output and lay off workers, thereby reducing income and ultimately saving.Saving paves the way for individuals to become rich, but if everyone saves more, the whole society will be depressed and impoverished.In tough times, what is reasonable for an individual (frugality) can be disastrous for the economy as a whole.Since everyone is saving, many frugals will end up out of work.

It should be noted that the consumption advocated by the frugal paradox is a kind of active and rational consumption, rather than blind unlimited consumption, which will inevitably lead to extremely serious consequences. In the summer of 2007, the financial crisis that originated in the United States and swept the world was caused by human greed and excessive irrational consumption.

"It's your fault, at least in part. You spent too much money as an American consumer. You bought too much or too big a house, took on too much debt, and didn't live within your means. Your lavish lifestyle, It was one of the causes of the worst financial crisis since the Great Depression.

"Right now, you have to do your part to end this crisis. How? By spending. Many of you are suddenly frugal, so take a break. Congress and President Obama are sending you A tax rebate check that encourages you to stimulate the economy. So go out and spend your money, the future of the country depends on your spending."

This seemingly contradictory statement happens to be the best interpretation of the paradox of frugality.Excessive consumption leads to the outbreak of the crisis, and moderate consumption promotes economic recovery.The so-called success and failure of consumption, excessive thrift and blind consumption are not correct.From the perspective of economics, we can better understand the significance of individual behavior for the operation of the entire national economy.

(End of this chapter)