Not that this will get the article any more hits, but I strongly recommend Bob Murphy's takedown of the all-too-common belief that it's somehow impossible or damaging for everyone to reduce or eliminate their debts. It was in response to the latest articulation of the idea by Paul Krugman.
Really, folks, any economy that relies on a certain level of indebtedness is not an economy I care to defend, as it rests on a poor foundation. The purpose of an economy is to provide people with the best consumption/leisure/labor bundle possible, not to goose the hippest new econometric.
6 comments:
Agree: The purpose of an economy is to provide people with the best consumption/leisure/labor bundle possible, not to goose the hippest new econometric.
Disagree: Really, folks, any economy that relies on a certain level of indebtedness is not an economy I care to defend, as it rests on a poor foundation.
Certainly debt is not a priori good, but lots of Austrian types seem to think of debt as a priori bad, and it's very popular to think of "high level of debt" as bad. This is just confused: debt is just a particular kind of contract and not particularly special and thinking of it as special is bound to be flawed.
I wasn't claiming that debt is a priory bad, just that for an economy to fundamentally rely on the existence of debt is bad. In other words, if an economy is at the point where chaos would ensue from everyone deciding to pay off all debt, then something is fundamentally wrong with it, and that thing needs to be fixed.
I mean, it certainly sounds *weird* and perhaps fragile (which is bad), but it sounds like you're trying to say something beyond that. Specifically it sounds like your cultural upbringing (the sense that debt is something to be avoided unless it has big benefits) is influencing your judgments about the arrangement of the economy in a way I don't think is very useful. I'm sympathetic because I and the people around me have also gotten this message that debt is something to avoid (unless the upside is big).
But debt isn't special. If people stopped wanting to engage in "investment" it would also result in big changes. Would you make a similar statement about equity contracts?
Yes, I would. No economy should depend on people entering equity contracts either. Equity was made for man, not man for equity (at least I hope I'm using that allusion correctly).
Yes i am also agree on the purpose of an economy is to provide people with the best consumption/leisure/labor bundle possible, not to goose the hippest new econometric.
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