Munich Personal RePEc Archive

Graphic explanation for welfare economic foundation of hoarding loss

Miura, Shinji (2015): Graphic explanation for welfare economic foundation of hoarding loss.

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Abstract

Saving brings an economic loss. The author intends to publish a paper, which gives a foundation of this paradox of thrift by connecting money circulation analysis and welfare economics in the case where saving is limited to hoarding. As an introduction of the intended paper, this paper provides a simple explanation for hoarding loss using some graphs. Under certain conditions, the representative agent hoards money in order to increase utility, but the hoarding actually decreases it against agent’s rational intention. This irrationality of rationality occurs because the agent maximizes their utility while lowering the budget of the entire relevant term. This conclusion is derived from the agent making the decision with an ignorance of the whole expenditure reflux. Since the interest of a selfish agent is limited to their private range, the agent ignores the objective truth.

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