Eat Your Pizza, or, The Beginnings of a Dialogue with My Two-Year Old and Four-Year-Old About Macroeconomic Stability
Categories:
Austrian Economics
This is a teaser for a forthcoming post. The scene: Chuck E. Cheese’s in Vestavia Hills, Alabama, where my two-year-old and my four-year-old are nibbling like birds on slices of the large pepperoni pizza we ordered. This was not what I expected.
Economist: Children, eat your pizza. If you don’t, we will have to save it for later and our grocery bill for the week will be lower. The ensuing reduction in consumption spending will cause aggregate demand to collapse and imperil the fragile economic recovery.
To be continued.
READER COMMENTS
Daublin
May 4 2013 at 11:21am
Do continue!
It is a very good question why being inefficient would lead to an overall improvement in the economy.
Philo
May 4 2013 at 11:26am
Unless you invest the money you don’t spend on groceries in, say, the stock of some capital goods maker (better than a consumer goods company, since demand for consumer goods has “collapsed”).
John T. Kennedy
May 4 2013 at 3:14pm
I don’t see why you can’t just throw out the leftover pizza and save the economy.
Andrew
May 4 2013 at 5:25pm
Yep, your story works for the short run. But you can relieve your kids by letting them know that we’re likely out of the short run scenario where simply increasing demand will solve all our woes.
Given the all-time high level of nominal corporate profits, and the mean duration of unemployment at roughly 40 weeks, it strains credulity to attribute the high unemployment rate to a lack of demand.
MingoV
May 4 2013 at 5:30pm
Philo wrote: “Unless you invest the money…”
Our wonderful national government has worked diligently for decades at eliminating the scourges of saving and investing. It taxes interest and dividends. It taxes capital gains (without correcting for inflation). It taxes corporate investment earnings (as well as profits).
Our superb national government also supports borrowing by giving tax deductions for interest paid on mortgages and home equity loans. It also freely offers student education loans (even to those who are unlikely to graduate).
Given the above, Art Carden’s sardonic Economist answer seems correct!
Keaton Brownstead
May 4 2013 at 6:09pm
I’m really excited to see where you go with this!
Ted Levy
May 4 2013 at 6:45pm
Bur there are people starving in Africa,Dad. Can’t we just send it to them?
stubydoo
May 5 2013 at 8:53am
Attempting to “save” by holding onto useful physical stuff for your own use later is different from attempting to “save” by holding a stock of the commonly accepted medium of exchange/unit of account etc. when others are also trying to do the same while a fixed quantity of it exists.
Alex Godofsky
May 5 2013 at 10:18am
Why would you ever need to convince a small child to eat his/her pizza?
Himanshu Sanguri
May 6 2013 at 1:25am
I would like to highlight the stark difference between executing a house budget and running the economy. Size does matter and if the large body of economu is heterogenous, any economist can not use a single stick to measure all. Sometimes, I really feel sad on the plight of the economic fraternity who have to make economic policies that should be intensive growth oriented and popular welfare enriched.
Kitty_T
May 6 2013 at 10:46am
I challenge an underlying assumption. If your children do not eat their Chuck E Cheese pizza, they will, upon arriving home, claim hunger and demand to be fed. (Probably dessert, because the leftover pizza will be “icky” and left for the grownups.) Thus your home grocery budget likely will not decrease on net, since you will have leftover pizza but have to replace the delectibles they consumed instead.
Also, you have my condolences on the Chuck E Cheese thing.
James Oswald
May 6 2013 at 11:14am
While I suspect this may be sarcasm, non-durable consumption is very stable over the business cycle. Instability principly comes from variation in investment, housing, and durables. Grocery spending just doesn’t change much, so your kids don’t have to worry.
Hazel Meade
May 6 2013 at 11:15am
Maybe your kids are getting too old for Chuck-E-Cheese and their tastes (demands) have changed. You might have to invest in a better quality pizza establishbment, or perhaps try restructuring them into general Italian. (Maybe start off with one of those family style places.)
Aaron Zierman
May 6 2013 at 1:04pm
Delayed consumption = savings
Savings = Investment
Investment = Greater opportunity for future consumption
Krishnan
May 6 2013 at 1:12pm
A slight variation “Kids – eat your pizza completely – instead of leaving 15 to 20% behind which we have to throw away”
If they eat it all, they are less likely to be hungry later – less food consumed later – less waste – less energy expended … (and that will certainly impact the economy – less food produced, less energy generated/consumed) (So, is waste good – because it helps the economy grow? Nope (!) – those resources could have been used for something else – instead of being thrown away)
(I am curious as to what will follow …)
M4-10
May 15 2013 at 2:59pm
Aaron – Stick the leftovers in the garage and watch your investment grow!
Comments are closed.