Robert Wuebker
by Robert Wuebker
Wed Feb 18th 2009 at 9:00am UTC

And More Resetting

The Freakonomics blog in the New York Times has a brief article (and a spirited discussion section) considering how people’s spending patterns might adapt to changes in income. While the conjecture about which products and services might be more or less income-elastic is certainly interesting, the first two paragraphs contain two very curious words which add up to a pretty big unchallenged assumption: “presumably,” as in “a (presumably) temporary decline in income during the recession; and “the short run.

In the short run, Daniel Hamermesh is probably right: lots of things get short shrift when income shrinks, including his list of “postponable luxuries” like plastic surgery, participation in the Austin Marathon, and pediatric visits (not my idea of a postponable luxury, but to each his own). But I am not convinced that we’re in a short run situation at all, and that we are witnessing the presumptive temporary decline in personal income.

This may not be a recession. We may be in Act I of The Great Reset. If we are in a recession, the standard economist playbook holds. If we are in uncharted waters, all bets are off.

So, what do you think? Is this a permanent or temporary setback? What are you you postponing, or planning to forego entirely?

2 Responses to “And More Resetting”

  1. Fred Says:

    The answer to the question depends in part on whether the value of the dollar declines significantly, the price of gas returns to $4/gallon and if interest rates move up significantly.
    We shortened our European trip last summer when the euro was in the $1.50+ range, we took one less trip to Boise (1000 miles round trip) due to high gas prices and our income (we are retired) is down due to lower earnings on the cash portion of our investments.

  2. hayden fisher Says:

    This downturn is remarkably different than any of the previous ones because we’re truly at the crossroads between what was and what will be. Never has so much changed so fast. The digitizing of society has done more to change it than perhaps any breakthrough predecessor, more so than the printing press, more so than the industrial revolution, etc. It’s hard to imagine that 30 years ago, most letters still went out via typewriter and most accounting was done by hand assisted only by calculators. At the tops of the business food chains, mainframe computers hunkered through tasks that I bet my iPhone can do faster. 30 years ago most people received their news from the newspaper or during the evening news shows that aired on only 3 networks. Talk radio hadn’t even emerged yet. The world book encyclopedia was a wonderful resource to have on the shelf and long-distance calls were expensive. Fed Ex had yet to be born. The answering machine was a new appliance.

    Today, we share information, documents, thoughts and just about everything else with lightning speed. Everything, it seems, can be stored, accessed and shared in the blink of an eye with little effort. Etc. etc.

    Bottom line, we’re truly in a new era. The economy never will be the same. Some businesses and industries simply will not return. Others will prosper in their wake. Huge segments of society will be left behind. Early-on, the likely result will be tremendous inequalities that will lead to newfound global social unrest. New policy-making and ideologies will be born. New thinkers welcomed in some corners and stoned in others. The challenge of the next generations may be to find ways to level the playing fields and strike balances between the new-haves and the older-have-nots, particularly since many will be changing uniforms and assuming unanticipated and uncomfortable roles.

    In the end, society will evolve because human nature is what it is- the basic human emotions and desires have not changed; just the surrounding bulls–t, to quote Eddie V. and Pearl Jam. But societal contexts will change tremendously and the circles of influence will undergo tectonic shifts.