By fighting for freedom in Washington, I’ve condemned myself to a life of frustration and aggravation. One of my many pet peeves is that so many people in DC believe that economic growth depends on consumer spending.
Back in the early days of this blog, I wrote the following.
Many people assume that consumer spending drives growth because it is roughly two thirds of the economy. But this puts the cart before the horse. Higher levels of consumer spending do not cause prosperity. Instead, more consumer spending is best understood as a symptom of prosperity.
So you can imagine how irritating it is for me to see news reports about how Black Friday spending will goose the economy.
This video debunks this notion, while also explaining that Keynesian economics is flawed because it misinterprets the role of consumer spending.
If you like this video, also check out this video on IRS complexity.