Should Everyone Spend Less than He or She Earns?

Question: exjunior asked

I’ve always thought Kant’s categorical imperative was a good guide for ethical behavior. But then I pose the question, should I spend less than I earn? Following Kant, I consider what would happen if everybody spent less than they earn all the time. Insofar as I understand modern macroeconomic theory, the result would be a depression. But spending less than you earn is manifestly a good thing. Has economics proven Kant was wrong?

Answer: I disagree with your statement that “spending less than you earn is manifestly a good thing.” In order to save for retirement, spending less than you earn is a good idea when you are young. But it is totally appropriate for retirees to be spending more than they are currently earning. In the long run, looking past business cycles, retirees spending more than what they earn during their retirement years (as they should) balances out for younger people spending less than what they earn (as they should).