David writes: >Isn't it Keynesian dogma that the problem with the rich is
that they save and do not consume (relative to the non-rich), and that the
government can goose the economy by redistributing wealth from the rich
(the savers) to the non-rich (the spenders)? How do Keynesians explain
data like this -- the national savings rate actually drops when the rich
increase their wealth?<
it's a British-Keynesian assumption (not dogma) that the rich save a bigger
percentage of their income than do workers, i.e., have a higher marginal
and average propensity to consume _all else constant_.
I wouldn't say that it's a "problem" (and it clearly isn't _the_ problem),
except that _all else equal_ a redistribution to the rich would depress
consumption, and _all else equal_ that would hurt aggregate demand and
employment. But if all else isn't equal, then the "wealth effect" of a
rising stock market could lead to a _rising_ propensity to consume on the
part of the rich. Note that the story is about changing _wealth_, while the
propensity to consume refers to how _income_ affects consumption.
Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
