Suppose that manuel, an economist from a university in arizona, and poornima, an economist from a nonprofit organization on the west coast, are arguing over saving incentives. the following dialogue shows an excerpt from their debate:
poornima: i think it’s safe to say that, in general, the savings rate of households in today’s economy is much lower than it really needs to be to sustain the improvement of living standards.
manuel: i think a switch from the income tax to a consumption tax would bring growth in living standards.
poornima: you really think households would change their saving behavior enough in response to this to make a difference? because i don’t.