FoC (7) -Keynes and Thrift

I have just come across this interesting statement by John Maynard Keynes. In 1931 during a BBC radio talk, he made the following plea.

Therefore, O patriotic housewives, sally out tomorrow early into the streets and go to the wonderful sales which are everywhere advertised. You will do yourselves good – for never were things so cheap, cheap beyond your dreams. Lay in a stock of household linen, of sheets and blankets to satisfy all your needs. “And have the added joy that you are increasing employment, adding to the wealth of the country because you are setting on foot useful activities, bringing a chance and a hope to Lancashire, Yorkshire and Belfast. (Nicoli Nattrass, Jeremy Wakeford and Samson Muradzikwa, Macreconomics, p. 140).

I still think that his paradox of thrift is inappropriate, but the remedy he advocated here is not quite the same as that pushed by mainstream economists. They urge households to increase consumption.

Household lien, sheets and blankets are semi-durable goods. They actually have a long life, if they are not used immediately, so the housewife who followed Keynes' advice was not necessarily increasing her present consumption. She was actually purchasing goods that could be consumed in the future when her current linen had worn out. This could be a form of saving, if she kept the linen for use in the future. She is increasing her potential to consume other goods in the future, at the time when she will not need to buy linen. This is more sensible than just buying non-durable consumption goods.

I do not know if Keynes was deliberate in the example he chose, but his followers do not seem to have noticed the difference.

The other important fact that Keynes noted, but did not seem to understand, was that the prices of household linen had fallen dramatically. They were cheaper than anyone could imagine them being. That should have been enough to get housewives purchasing linen without the encouragement of patriotism by government officials. This is the best solution to a recession. The falling prices enables people to purchase more with their existing income.