Our economy runs on consumer’s spending money. We saw during the recession that when consumers stopped spending, the economy sinks. But is there ever a point in time where someone might say, “I have enough,” and then curtail how much they buy? N.C. State University economist Mike Walden responds.
“This is an excellent question, and it’s actually one that both economists and philosophers have discussed for centuries. In fact, probably one of the most influential modern economists, John Maynard Keynes, foresaw a time when people would say, ‘Hey, I have enough.’
“That means they would work less because they wouldn’t need to spend as much money. And in fact, he predicted that by now, the average work week would be around 15 to 20 hours. Obviously, that’s not happened, and for people who really look closely at this question, there are two major reasons.
“One, of course, we’re always seeing new products out there, new products and services getting created. For example, I spend more now per month on my cell phone than I do on clothing. Cell phones didn’t exist 25 or 30 years ago. Computers are the same. So new products and services are always motivating us to spend more.
“And then secondly, a little more subtle, many economists think that there’s this keeping up with the Jones idea. That is to say that we’re always looking at the income level above us and what people above us are spending, and that sort of motivates us to spend and copy them and try to emulate them. And that that drives additional spending. But still a very, very interesting question and one I think we’ll be discussing for a long time.”