The Paradox of Thrift

The Paradox of Thrift occurs when individuals try to save more money during tough economic times, thinking it’s good for themselves, but if everyone does this simultaneously, overall spending decreases. This reduction in spending can slow down economic growth, leading to less income for everyone, including savers. Essentially, while saving is beneficial for individuals, widespread thriftiness can weaken the economy, making it harder for everyone to prosper. The paradox highlights how collective behavior aimed at personal security can unintentionally harm the broader economy.