Wednesday, April 22, 2009

Ranting about nothing very much

This Are You an Austrian? [1] quiz has some fail in it. Take question 4:

What is the economic impact of saving?

The first two of four multiple choice answers to this question are:

In normal times, saving is not economically harmful but in a recessionary environment it can cause the economy to spiral downward.

Saving reduces consumer spending and may not be translated into investment spending because of investor pessimism. This will reduce total demand in the economy and lead to unemployment.

One way of correcting this is to expand the money supply to keep interest rates low. This will support private investment and stimulate total spending in the economy.

Fiscal and monetary managers need to implement policies that discourage hoarding and encourage current expenditure. As for saving over the life cycle of individuals, we need a social safety net that will provide for people in their older years.


The vast accumulation of wealth within select classes and families creates an economic oligarchy that shuts out those who cannot gain a foothold within the economic system.

Inheritance taxes, and taxes on dividends, are essential to a society that values equality. After all, the yield from vast bank accounts really amounts to unearned income. No society can tolerate some people living off interest while others live paycheck-to-paycheck off the meager sums offered by minimum wages.

The first answer is basically right, but the second seems like a non sequitur straw man version of a raging Marxist. What does inheritance tax have to do with the question of whether saving is good or not?

[1]: Economist, that is.

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