LettersWhy Hong Kong consumers need to spend handout vouchers on ‘useless’ things
- If we spend the vouchers on necessities to save our money instead, there is no net consumption boost to the economy. For the sake of society, we must spend
Traditional Keynesian economics argues that the economy could be boosted if its aggregate expenditure (which includes consumption expenditure) increases. Therefore, to stimulate the economy, we must increase our consumption expenditure by spending the vouchers on things we normally would not spend on. This could be getting a designer bag as opposed to an ordinary one, or maybe buying a higher quality piece of fish from the market.
Well, if you are more of a fan of Thomas J. Sargent and Neil Wallace, you are likely to dismiss what I’m saying here entirely.
In fact, if you’re a stringent believer in new classical economics, you should not register for these consumption vouchers so as to minimise the degree of government intervention!
I understand that some people may think that it is better to spend these consumption vouchers on necessities so they can save the money. But we live in a society and we should not retreat into excessive individualism.
As Alexis de Tocqueville argued, we should act based on the principle of “self-interest rightly understood”, because what is not privately optimal for you right now may reward you in the long run.
Thus, we should not be short-sighted and take care only of what is right in front of us, but take a more holistic view and pursue the action that is beneficial to the collective in the long run.
Even if stimulating the economy is of minimal interest to you (e.g., perhaps your job security is not affected by the economic state), you should remember that we live in a collective society where everyone should care about each other.
Of course, I am not suggesting that everyone should spend their consumption vouchers needlessly. It is advisable to spend these vouchers on necessities if one is struggling financially to meet the subsistence level of consumption.
But, where that is not the case, we should consider spending these vouchers “needlessly”, so we can reach the socially optimal outcome of the economy benefiting to the maximum.
Ernest Lau, student, Durham University