from The Century Dictionary.
- noun In poht. econ., an abnormal condition of the market in which the general demand for commonities is inadequate to absorb the normal supply.
from the GNU version of the Collaborative International Dictionary of English.
- noun (Polit. Econ.) Consumption of less than is produced; consumption of less than the usual amount.
from Wiktionary, Creative Commons Attribution/Share-Alike License.
- noun economics Insufficient
consumption(for financial stability)
from Wiktionary, Creative Commons Attribution/Share-Alike License
I have never understood how the idea of "underconsumption" ever caught on.
As should be obvious by now, much of the material that I have been forwarding is connected to major debates within Marxism, such as underconsumption / overaccumulation, dependency theory / Brenner critique, etc.
Deirdre McCloskey writes that economists no longer view underconsumption as a threat to full employment.
Two factors are likely to make underconsumption persist, according to Mr. Dumas.
Similarly, Japan has long suffered from underconsumption and raising the individual income or sales tax would likely further depress consumer spending, hurting companies focused on the domestic market.
Investment has to be balanced by consumption, otherwise you get underconsumption, overcapacity/overproduction, the rise of speculative investment vehicles, bubbles, and crashes.
Note also Americans 'preference for expenditures that have a high signaling quotient -- overconsumption of goods like autos and housing, underconsumption of leisure and travel.
Krugman brings up underconsumption (wherein the working class borrows a lot of money because all the money is going to the rich) and overconsumption (in which the rich spend and that makes the next-most rich spend and so on, until everyone is spending too much to keep up with rich people whose incomes are growing much faster than everyone else's).
This naturally reduced the demand for goods of all kinds and brought on what seemed to be overproduction, but was in reality underconsumption when judged in terms of the real world instead of the money world.
For short periods we can have overinvestment and overconsumption as well as underinvestment and underconsumption, all because of the way money works, especially fractional reserve banking.