The ERE people have basically shown that a large portion of Americans should have no problem being ready for retirement. We can all think of obvious exceptions--things happen. But MMM has shown that a 30-year working life should be plenty of time to accumulate a lot of savings, even on below-median incomes. ERE is the solution to the retirement crisis, the student loan crisis, and probably a bunch of other crises--at least at the individual level. It's the Garett Jones approach to inequality:
This approach might not be of much help to policymakers, but it's a pretty good solution at the individual level. It might prevent some of this sort of thing.
[--]
A popular rebuttal to the ERE arguments is something like this: That's fine for you, but if everyone did it, the economy would collapse since nobody is buying anything. One of the founders of the movement (he goes by Jacob) has a note in response:
I don't have a problem with the ERE people responding to the consumption question in this way. There is no economic law saying that two thirds of output must be spent on consumption (though some of the secular stagnationists seem to agree with the ERE critics...). But they're ignoring other important channels. ERE isn't just about less consumption; it's about less labor. Labor is a production input! Less labor means capital is less productive in the short run; in the long run, this means less capital as well.
[--]
ERE works great in partial equilibrium. Mr. Money Mustache is very enthusiastic about how technology and general wealth have made his lifestyle possible. But if everyone did it, who would build the gadgets? Who would build and operate the machines that build the gadgets? Who would work for the companies in which MMM owns stock? The key point is this: the ERE world isn't just about people saving more. It's about people working less, and that's what kills it.
ERE works if we're willing to accept lower aggregate output than the counterfactual. I don't get the impression that the ERE people accept that. The robots can make it possible. Until then, it's not in the feasible set.
But that doesn't matter! Because not everyone is trying to do it. You and I can still do it, or at least get as close to it as we want.
- More Here
So let's start training ourselves and our children to delay gratification, to forego that great sound system on the new car, to eat at home a little more often.
This approach might not be of much help to policymakers, but it's a pretty good solution at the individual level. It might prevent some of this sort of thing.
[--]
A popular rebuttal to the ERE arguments is something like this: That's fine for you, but if everyone did it, the economy would collapse since nobody is buying anything. One of the founders of the movement (he goes by Jacob) has a note in response:
It is important to realize that a consumer economy in which people go to work in order to buy stuff is not the only form of economy. It is just the current one.
Money can also be spent on productive assets, art, preserving nature, space exploration, eliminating hunger, maybe even eliminating war. It’s just that we've collectively chosen to spend it on cell phone upgrades, furniture replacements, fashionable vehicles, shoe collections, throwaway electronics, and so on.
I don't have a problem with the ERE people responding to the consumption question in this way. There is no economic law saying that two thirds of output must be spent on consumption (though some of the secular stagnationists seem to agree with the ERE critics...). But they're ignoring other important channels. ERE isn't just about less consumption; it's about less labor. Labor is a production input! Less labor means capital is less productive in the short run; in the long run, this means less capital as well.
[--]
ERE works great in partial equilibrium. Mr. Money Mustache is very enthusiastic about how technology and general wealth have made his lifestyle possible. But if everyone did it, who would build the gadgets? Who would build and operate the machines that build the gadgets? Who would work for the companies in which MMM owns stock? The key point is this: the ERE world isn't just about people saving more. It's about people working less, and that's what kills it.
ERE works if we're willing to accept lower aggregate output than the counterfactual. I don't get the impression that the ERE people accept that. The robots can make it possible. Until then, it's not in the feasible set.
But that doesn't matter! Because not everyone is trying to do it. You and I can still do it, or at least get as close to it as we want.
- More Here
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