Murphy on the Paradox of Thrift
By David Henderson
Fellow blogger Arnold Kling has weighed in on the paradox of thrift. Arnold states:
Robert P. Murphy and Bryan seem to me to be confusing things.
Murphy starts with an illustration of the paradox of thrift from Keynesian economist Steve Fazzari. I don’t like Fazzari’s illustration, so perhaps my quarrel is with him.
I’ll think through Arnold’s exposition. But Robert Murphy didn’t like Fazzari’s illustration either or, more exactly, didn’t agree with it, which is why he wrote his devastating article. I highly recommend it. I’ll admit my bias: as editor of the monthly article on Econlib, I commissioned it. But see what you think.
I’m guessing that Bob Murphy can find the flaw in Arnold’s exposition of the paradox of thrift too. Stay tuned.