system
Given the following post, respond as if you're commenting on Reddit:
human
Why do some economists believe that decreased consumption generates economic growth?

I've seen it posted a couple times here that decreased consumption generates growth and increased consumption would reduce growth, but I don't understand why that might be - it seems like the opposite of the usual explanation.  


Under one model I've seen, a decrease in consumption causes excess inventory, which counts as an investment in some models. However, companies respond to excess inventory by cutting production, which reduces income, so there is no real increase in productive capital. I think this is Keynesian? This seems to be a fairly standard explanation for the 2008 recession?  


Another model in an export-led economy might be that decreased domestic consumption allows for increased exports, causing foreign investments to rise. Some examples might be countries like Japan and Germany. But I'm not sure if that's a real increase in investment or just a change in ownership? And it seems like not every country can do this? (I've seen talk about a "global savings glut".)  


What are other explanations? Which models use those, and how are they justified?
gpt
Your confusion stems from the fact that increased consumption have opposite *short run* and *long run* effects. Short run and long run here have economic definitions, but you can think of short run as anything less than two years, and more than 5 years being definitely long run.  

In the short run, increased consumption increases Aggregate Demand, which increases sales, production and measured GDP. However, this is not the whole story. The increased demand also tends to increase inflation. 

The higher inflation causes the Central Bank (the Federal Reserve in the US) to increase interest rates, which tends to reduce private investment. The lower private investment decreases the accumulation of physical capital, and reduces research and development. This slows down the growth of productive capacity, and will have a negative effect on long run economic growth.

We say that in the long run, higher consumption *crowds out* investment.

On the other hand, lower consumption today will lower GDP this year, but will also lower inflation. This allows the Central Bank to lower interest rates, which will lead to more private investment and higher economic growth in the future.