Wednesday, November 6, 2013

Incomes, Sticky Markets and the Consumption "Big Three"

While this post could apply to complex aspects of consumer choice (for there are indeed many), I felt it would be helpful instead to consider some of the most basic aspects of life. In other words, perhaps those who normally wouldn't associate economics with what people actually do, could possibly relate! (or so I endlessly hope) First let's cast all "touchy-feely" thoughts of Maslow pyramids and the like to the wind, and think about what all people are trying to accomplish - through strategies which meet with varying degrees of success at any income level. Decision making processes tend to revolve around these three things, and they often become the bigger part of one's identity in the process:
  1. Can I have a family?
  2. Can I keep stuff?
  3. Can I get around?
Heh, without the usual "consumption clothes", the big three almost sound like "slacker" material. Strip away the openly shared life decisions - however - and there it is. All of these involve huge consumption stories. As luck would have it, the same elements that make it easier to get and keep a job, are also the elements a job is supposedly able to buy. Where does one "board" that moving target in recessionary times, when there aren't enough "musical chairs" to go around? At best, much in the way of low income work is temporary, thus may not lend itself to any of the big three in any permanent sense.

Unfortunately in the U.S., answers of "no" to all of the big three can often mean prison time as well. But more importantly: whether or not these conditions are adequately met by supply side scenarios, plays a tremendous role in whether a plethora of consumer options can be fully explored in the course of one's lifetime - discretionary income or no. Typically, those with mid range to upper level income often find ways to take care of these issues and then some, but at least two things affect how: cultural inclinations or the degree to whether one enjoys their work more than their free time.

A typical example of cultural choice aspects is this post from Parke Wilde. The details about his family are familiar material in many a magazine article or conversation: indeed this is one way lots of people in the U.S. think about maximizing choice in a larger sense. Some in the middle class also compensate by living in cities which are not valued in "exclusive" terms - which certainly applies to Texas, for instance. A small percentage of adventurers may decide to opt (mostly) out of the first and second of the "big three", just to make the most of the third choice. Perhaps lesser known as well are examples of families which decide to live in countries where  purchasing power parity restores lifestyle choices once possible in developed countries. From time to time there have been interesting stories in this regard, in Scott Sumner's comment thread.

On the other hand, the stories that lower income levels have to tell about the big three, tend to be more popular in various fiction formats - rather than "how to" articles - for obvious reasons. Generally, those who are unemployed or else lower income, tend to compensate by leaving out elements which others consider essential - out of necessity. Plus, if these three criteria aren't always possible to meet through one's own abilities, by no means is this easy to explain to others - even in a level headed and rational sense.

Unless people experience these circumstance for themselves, the shift in perspective can often be too foreign to contemplate. Indeed - a focused, determined attempt to salvage all three elements for the sake of continued normalcy, can of itself lead to actions which make little sense to others and that one may regret afterward. How to know, when to just let go? And unfortunately, once loss is experienced in these areas of life, one can't always think about it rationally or logically after the fact.

It's no longer enough to be resourceful, for definitions of livability continue to move upward even with polarized incomes. In other words, methods of "getting by" which were once admired, now are often illegal instead. One recent example involved a couple doing some time in prison, who found a way to make a home for their children in a school bus, cared for by an aunt. When the situation was "found out" and quickly deemed untenable, I had to wonder: how would the municipality have reacted, had the imprisoned couple simply left their children homeless? Fortunately the community came to everyone's rescue and had some compassion for the couple who would be back with their children soon. Too many stories don't turn out so well.

There are countless legal ambiguities for lower income levels, which need to be resolved. These ambiguities exist across the entire spectrum: be it bankruptcies, family law, business, property and personal matters. All of these issues make it very difficult for those with lower incomes to plan for long term contingencies, once they reach a certain point in the big three. What's more, too many attorneys are willing to take these cases, even though they already know beforehand that little to nothing can be done to help their clients.

Uncertainty about legal matters - let alone too much solitude and increasing isolation - can also be big contributors to health issues. Because too much vital decision making does not have the same elements of voluntary choice as those with higher incomes, a certain amount of shame is involved. Consequently it is not easy to share such burdens with one another and there is less trust all around.

Efficient markets for low income do not have easy or ready solutions. But the fact that so little has been accomplished so far, only means that the clamor for "livable incomes" will get louder. And unfortunately, raising aggregate income levels (with no measurable wealth gain other than consumer demand for non innovated markets) means an equilibrium still out of balance. In other words, it would continue to exacerbate the income divide and yet still leave too many individuals lacking economic access.

Instead of increasing the divide even further, the marketplace could instead work to narrow it by leaving room for greater resourcefulness, creativity and innovation than currently exist. Break up sticky markets, break up the idea that no growth is possible, break apart the idea that the world has to look exactly as it does now in the years ahead. Everyone deserves better than this.

Update - a good post for this link, as to per capita miles driven, eight year decline:

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