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On Americans' Consumption and Savings

Maybe Americans save too little — or maybe we save adequately — or save excessively.  Who knows?

Who knows?! Sounds like a silly question.  After all, we all know that we Americans are reckless spendthrifts.

Perhaps, though, what we know ain’t so.  Michael Mandel very clearly highlights several of the shortcomings afflicting the method used by statisticians to measure consumption and savings-and-investment.  For example:

Education — human
capital — is surely a long-lived asset, but government and personal
spending on education is mostly put into the consumption bin (the
actual physical plant of educational institutions goes into the
investment bin). Academic and government spending on research and
development also, by and large, go into the consumption bin [that is, counted as consumption expenditures rather than as investment expenditures].

See also here.  (Hat tip to Tyler at Marginal Revolution.)

I don’t know if these measurement shortcomings mask an American savings rate that, in fact, is much higher than it is conventionally believed to be.  Maybe; maybe not.  But I do know that these problems reviewed by Mandel are important enough to cause you to pause before you panic at the next report of Americans’ low, low, low rate of savings.

More fundamentally, one of the greatest benefits of globalization and the economic integration that it creates is that the savings rate of any one group of people becomes less important.  More on this point later.


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