Question Details	Asked By	Asked On
Is it true that a penny saved is a penny earned?	Dark_Crow	01/27/07
My personal opinion is that it is not true literally, or figuratively. In fact I think the idiom is foolish in the context of economics, and goes to the heart of the difference between right thinking and wrong thinking because it excludes the concept of creating wealth and new sources of growth; that is, the difference between Nation Building i.e. development to foster social harmony and economic growth- and stagnation- the result of cutting and running in Iraq. Comments?
Answered By		Answered On
ETWolverine		01/29/07
There are two concepts at work here: 1) A penny saved is a penny earned. 2) Penny wise, pound foolish. The two are often in direct opposition to each other. There are times when spending the extra dollar will bring you greater benefits, and in those cases, saving a little extra money is wrong. But there are also time when spending becomes unneccesary, and not saving that extra dollar is just wrong. Since we are using quaint old sayings to make our arguments, let's go to quait old fables: the story of the Three Little Pigs. The first two pigs build their houses on the cheap: they use straw and sticks. The third pig spends a little extra for bricks, but in the end that little extra spent pays off a big dividend against the wolf. In that sense, the first two pigs were penny wise, but pound foolish. Saving the extra penny didn't earn them anything except trouble. On the other hand, it never pays to spend more than you really have to for anything. The old TV commercial about the guy who keeps trying to pay more than the asking price for everything he buys is a good example. If hammers are a dime a dozen, why would you pay 11 cents for them? In that context, every penny you don't spend needlessly is one more penny (plus interest) that you can use where it really is needed. In the context of Iraq, trying to save money in fighting a war is pound foolish. It is worth it to spend a little extra to win quickly and decisively so that the cost later is much lower. You can use your fingers to crack open a walnut nut, and it will probably work eventually. Or you can use a hammer, and the nut will definitely be smashed. The insurgency in Iraq is the walnut: we can try to save a bit and try to crack them with subtlety. Or we can spend a little money for a big hammer to completely crush them. In that case, you are definitely right, spending a little extra for the hammer is worth it. Anyhow, those are the two concepts that are at work in any economic problem... trying to save vs. the long-term cost of that savings. That is what makes economics so interesting and difficult: trying to decide what to save on, and what to spend on. And much of that decision is political in nature. Elliot

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