From the Economist: Economics focus / The new (improved) Gilded Age

[Chuck Nessa]

I would welcome Guy back to music discussions.

[The Magnificent Goldberg]

Leave 'im alone! He's all right where he is, Chuck!

MG

[Chas]

A dollar of past consumption forgone , can be worth two dollars of future consumption , meaning we ( both individually and collectively ) are better off overall when we don't seek to maximize current consumption .

Well, the point that it is irrational to starve oneself to death tomorrow in order to maximize current consumption -- I can't disagree with that. But we are not discussing that straw man.

It's trivially true that as long as there are investments that offer positive risk-free rates of return, we'll be better off tomorrow by reducing current consumption -- but at the cost of being less well-off today. Whether the trade-off makes sense depends on personal preferences.

To say that it depends on personal preferences is to ignore the normative aspect implicit in the concept of intertemporally optimal consumption and savings . Individuals are notoriously hyperbolic discounters and hence sub-optimal savers .

Thus it is irrational to forgo future consumption for current consumption when doing so leads to less consumption over a lifetime .

Again, not true. Excepting those living in cardboard huts and subsisting on ramen in order finance the end-of-life consumption orgy, every single person you meet could increase lifetime total consumption by switching to the hut+cardboard lifestyle.

Not so .

From the standpoint of intertemporal optimality , it is just as irrational to have a negatively skewed lifetime consumption distribution as it is a positively skewed one given uncertainty , particularly concerning one's longevity .

The idea that there is "no return on consumption" is false, as any of us listening to a jazz CD, eating a tasty hamburger or watching an episode of Seinfeld will attest to.

This is disingenuous . You know very well that I was speaking of an economic return of the kind that could justify borrowing .

Return from consumption IS an economic return.

The types of consumption you cited , unlike for instance , those involving education and healthcare , do not have an economic return of the kind that could justify borrowing . All this discussion of savings preferences is a side issue since what I am interested in , and what you have conspicuously failed to address , is what considerations support your claim that borrowing to consume isn't necessarily a bad idea .

[The Magnificent Goldberg]

The types of consumption you cited , unlike for instance , those involving education and healthcare , do not have an economic return of the kind that could justify borrowing . All this discussion of savings preferences is a side issue since what I am interested in , and what you have conspicuously failed to address , is what considerations support your claim that borrowing to consume isn't necessarily a bad idea .

Borrowing more than one can afford to repay conveniently in order to consume does seem to be bad idea. However, borrowing what you can afford to repay conveniently, in order to smooth out consumption that may come in financially inconvenient lumps is not necessarily a bad idea. Some examples are holidays, Concord sales of CDs , cars and other vehicles. Personally, I greatly prefer NOT to incur interest, and don't, but I realise that this is a quaint personal foible of mine.

MG