The Peltzman Effect (or risk homoeostasis)

Keynes versus Modern Macroeconomics by Robert Waldmann

Mike Kimmel in the comment section:

The Peltzmann EfFect:(sic)  the more effective the satefy net is perceived to be, the more risks people will take.    Yes, it is micro, but I suspect applied to macro it explains a heck of a lot.  It explains why real economic growth rates in this country hit peaks in the 1930s and 1940s, and again in the 1960s, and have been going downhill since. 

Steve Roth comments on his comment:

Very interesting. I've been pondering the idea that widespread economic security is a public good, with positive externalities in encouraging "good" risk-taking and allocation of investment. (See the latest at interfluidity.) Ironically, this involves using the Peltzmann Effect to argue for positive outcomes, rather directly contrary to Peltzman's examples.

Kenyan Socialists would agree with Roth. The strong economic performance of the 50s and 60s was due to the safety net and creation of the middle class via the New Deal and GI Bill, etc. In the 1970s things went sideways as Japan and Germany came online and the inflation of the 70s brought on a Thermidor by the ruling class such as Doug Henwood has discussed. We've been living with the consequences ever since.

Starter Savings Accounts by Steve Randy Waldman

These “starter savings accounts” would be a popular vehicle for ordinary people who want convenience and safety with as little entanglement as possible in casino finance.

But the real benefit would be macroeconomic. “Market monetarists”, MMTers, and old-fashioned Keynesians love to squabble with one another, but they have a great deal in common.

By whatever combination of monetary and fiscal policy, in a depression, all these groups agree that some manner of expansionary intervention should be pursued to maintain spending and effective demand. But any such policy increases the risk of inflation, and so is opposed by people holding debt or fixed-income securities. The people with the most to lose from inflation are the very wealthy, who hold a disproportionate share of financial claims. But middle-class savers value their small nest eggs just as dearly, and make common cause with multibillionaires to oppose inflation. By providing means for small savers to protect themselves from inflation when intervention is called for, we can stop the very wealthy from using middle-class retirees as human shields, and thereby create political space to adopt expansionary policy.

Kenyan Socialists would support this. We're all about the positive externalities! Let's make the dismal science a little less dismal.