what is the paradox of thrift 
the paradox of thrift is an economic theory that personal savings are a net drag on the economy during a recession also referred to as the paradox of savings this theory relies on the assumption that prices don t clear or that producers fail to adjust to changing conditions contrary to the expectations of classical microeconomics the paradox of thrift was popularized by british economist john maynard keynes understanding the paradox of thriftthe proper response to an economic recession is more spending more risk taking and fewer savings according to keynesian theory keynesians believe that a recessed economy doesn t produce at full capacity because some of its factors of production such as land labor and capital are unemployed keynesians also argue that consumption or spending drives economic growth it s the wrong prescription for the larger economy even though it makes sense for individuals and households to reduce consumption during tough times 