system
Given the following post, respond as if you're commenting on Reddit:
human
Is there a conflict of interest between personal finance and the economy?

I may be wrong about this, but why does it seem like there is a conflict of interest between what's best for individual finance vs the economy? For example, it's best for a person to live frugally and use the most money to invest (education, health, retirement, etc.); whereas, it's better for the economy if everybody spends all of their money on not just essential but also luxurious goods. A society where people save more than they spend is a deflationary one. Likewise, a society where people invest more than they spend would probably cause a market bubble since more people buying a company's stock than it's product just drives its PE ratio through the roof

Another example is having kids is expensive. It's best for a poor couple to not have kids or only one if they want to get out of poverty as fast as possible. However, in economics, every couple should have 2 kids to sustain the future workforce and consumer spending.
gpt
The general idea that individual household prudence can be bad for the economy is absolutely correct - this is called the Paradox of Thrift, and while it was heavily popularised by Keynes (1936), it's been part of mainstream economics for a long time. Keynes himself notes that Adam Smith (1776) refers to it in The Wealth of Nations, saying "*What is prudence in the conduct of every private family can scarce be folly in that of a great Kingdom*", and John M. Robertson (1892) wrote a whole book called the Fallacy of Saving, saying "*Had the whole population been alike bent on saving, the total saved would positively have been much less... industrial paralysis would have been reached sooner or oftener, profits would be less, interest much lower, and earnings smaller and more precarious. This ... is no idle paradox, but the strictest economic truth*."

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The formalised version is essentially a prisoner's dilemma. There is some intertemporal balance of savings and consumption in each period which is optimal for the economy, and another one which is optimal for the individual. There is no requirement that the two are the same. Some economists bicker over how different they are, for example there are those who argue that savings represent investments and are also conducive to growth; which is not wrong, but from an intertemporal optimisation point of view, investment returns come with significant lag, so they are not optimal in each period. Consequently, no one really disputes that it would take a dramatic coincidence for the individual and collective optimums to be exactly the same even in one period for one individual, let alone in every period for every individual. This is made even worse in a recession, where greater economic uncertainty motivates higher precautionary savings, but higher savings would sink the economy into a larger hole.

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On the specific examples you choose to highlight though... some are more relevant than others. Overvaluation of the stock market isn't necessarily related to overinvestment, but rather inefficient allocation of investments. If the total value of investments increases dramatically, but the threshold for required returns remains the same, then there's really no change in valuations; instead, capital flows to underinvested companies, or to new opportunities. If there are no new opportunities but investment inflow continues to enter the market, that's not a problem in itself either, all it does is lower the expected market return and hence valuations continue to remain fair.

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There are actually a bunch more economic paradoxes; most kicking in when the economy is in a recession or otherwise impaired. The paradox of toil argues that an increase in willingness to work can have the effect of lowering wages, but if nominal interest rates are at a zero lower bound then total demand falls instead since people have lower spending power and no further available credit, workers just spend less and the economy shrinks. The paradox of flexibility argues a similar angle, but points to low wage stickiness (perhaps from having good-natured and understanding workers) making it easier for wages to fall, also causing the economy to shrink. The paradox of deleveraging focuses on banks, who when faced with economic recession, tend to reduce the risk on their balance sheet; but in so doing, tighten credit and magnify distress to the economy.