DISQUS

Paul Krugman has a blog post from a couple months ago with some less-than-rigorous charts that suggest there is a relationship between consumer confidence and the employment to population ratio. Which I suppose suggests that falling consumer confidence is connected with the actual status of the economy (instead of people just being mopey) although it might also suggest that stagnant wages might not be the biggest factor in consumer confidence, and that unemployment might be a more dominant factor.

Another more-or-less related factor is that debt has to be repaid whereas savings don't actually have to be spent, and as such debt has more of an impact on a person's options. For instance, if you decide you want to be a wandering hobo or something you can't do that if you have an obligation to repay your debts. (Or to a lesser extreme, you might feel pressured to take a job you're not totally fond of because you need the money.) So you not only have to worry about accurately predicting your potential future income, but also accurately predicting your future preferences.

(Although I suppose oversaving can have restricting consequences too if all that ramen causes long-term health problems or something.)

Richard: My impression is that the Difference Principle takes no position either way as to which of those scenarios is preferable.

It seems plausible that one could extend Rawlsian logic to produce some sort of tiebreaker (perhaps to consider the second-least-advantaged, then third-least-advantaged until you find one where there's a difference, which would allow for Pareto Efficiency) but I don't think the theory makes any particular statement either way.