Monday, April 04, 2011


Arnold Kling reports:
Michael Mandel pointed out that the large increase in household debt is not consistent with the basic necessities becoming easier to afford. I have to agree. Something to chew on.
If households get greater access to credit markets and necessities fall in price, then income effects can shift the preferences towards luxury goods.

I am far more likely to believe that households are buying more luxury goods than I am to believe that the price of necessities has increased. This would also be consistent with the observation that college students have nicer televisions and go to more exotic vacation spots than I.

1 comment:

Steamboat Lion said...

Yep, there are people in my town living in trailers because they "can't afford" to save for a downpayment. I doubt that it's the fault of WalMart and their "low everyday prices" on necessities. It's more likely the $40,000 SUV and the two snowmobiles parked out front that are stopping them from saving.