What is Paradox Of Thrift? Definition of Paradox Of Thrift.
Paradox of Thrift Essay. This is an economic concept that was coined by Maynard Keynes where he argued that the increase in the savings of individuals during a time when the economy was in a recession could result in overall decline of the aggregate demand in the economy and would end up leading to overall decline in the national savings.Paradox of thrift refers to contrasting implications of savings to households and to economy as a whole. Saving is treated as a virtue by households as they provide a protective umbrella against bad spells but same is treated as a vice by the economy as it retards the process of income generation.Paradox of thrift: A controversial Keynesian economics theory, which proposes that if everyone tries to save more during a recession, then aggregate demand will fall. As a result, the theory argues everyone would grow poorer instead of richer due to the decreases in aggregate consumption, saving, earnings, and economic growth.
The Paradox of Thrift is an economic concept which was made famous by John Maynard Keynes, though it is thought to have originated in the early 18th century.Definition: Paradox of thrift was popularized by the renowned economist John Maynard Keynes. It states that individuals try to save more during an economic recession, which essentially leads to a fall in aggregate demand and hence in economic growth. Such a situation is harmful for everybody as investments give lower returns than normal.
The Paradox of Thrift states that if consumers follow their natural inclination to reduce their spending and increase their savings during a recession, they are actually causing the recession to be deeper and their own economic situation to be worse.
