Dear NY Times: Was Keynes Right About Excessive Savings?

21 December 2008
Editor, The New York Times
229 West 43rd St.
New York, NY 10036
To the Editor:

You report that more companies are reducing their contributions to employees' 401(k) retirement accounts, saying that this "move will hurt savings" ("In Need of Cash, More Companies Cut 401(k) Match," December 21).

Perhaps. But, if so, why is your report filled with gloom and doom? According to your Nobel economist columnist, Paul Krugman, the great sage whose wisdom we must now rely upon to guide us out of recession is John Maynard Keynes. Keynes famously believed that economic downturns are caused by excessive saving. Surely if this late Cambridge Don were correct, companies that pump less money into their employees' savings in order to spend more money staying afloat are national benefactors.


Donald J. Boudreaux

Don Boudreaux is the Chairman of the Department of Economics at George Mason University and a Business & Media Institute adviser.