Ban The Bomb, And The Savings Rate Could Mushroom

Why save for the future if you think there's a good chance there won't be a future for you to enjoy? In the past decade, University of Michigan economist Joel B. Slemrod has published separate studies which showed that fear of nuclear war has tended to depress the U.S. personal savings rate, and that people in countries with high savings rates tend to exhibit less fear of a nuclear war threat than citizens in nations with low savings rates.

Now, Slemrod and political scientist Bruce Russett of Yale University have found confirming evidence at the individual level in consumer surveys that were conducted by the University of Michigan's Survey Research Center in 1990. The surveys inquired about people's economic situations, educational backgrounds, satisfaction with their lives, and past, present, and expected savings behavior. As a last question, they asked how individuals felt regarding the likelihood of a nuclear war and whether their feelings about this had changed in the past year.

In their analysis of the survey results, the two researchers found that respondents' professed fears about the likelihood of a nuclear war were significantly related to their savings behavior, even after adjusting for age, economic status, general happiness, and other factors that might affect savings. Further, people tended to save more and to plan to increase their savings as fears of a nuclear holocaust diminished.

Fear of nuclear war, of course, is neither the only nor the most important variable that appears to influence savings behavior. But Slemrod points out that the U.S. personal savings rate has risen somewhat since the cold war ended. "If international tensions continue to subside," he says, "a higher U.S. savings rate could turn out to be an unexpected peace dividend."

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