Time Magazine recently put out a piece identifying "25 People to Blame for the Financial Crisis." Actually, their piece should be retitled "300 Million People to Blame..." because one of the parties they accuse is the set of American consumers. The charge? Living beyond their means.
On this note, I've noticed recently that everyone is taking small steps to try and survive the downturn, sometimes in the most unexpected places/ways. Consider what happened to me yesterday:
1) I was told that I would have to provide my own cake for my upcoming thesis defense because the Graduate School was no longer making such purchases.
2) I was kicked out of Au Bon Pain because the management wanted to close up shop an hour early. One of the employees told me that the reason for this was that the cost of paying him for the extra hour and using the electricity far exceeded anything they would get from additional business. He went on to mention that, recently, the store would close early if number of customers was low, and urged me to bring my friends to ABP as well as to the nearby also suffering Gourmet Heaven.
Will the forthcoming tax breaks/credits and wages paid out to the labor force soaked up in infrastructure related jobs induce us to stimulate the economy by spending more money at ABP or on cakes? Only time will tell. At present though, the difference between our habits last year this time and our actions now are striking. I wonder if our new found parsimony will persist even after the crisis weathers: some recent research by Ulrike Malmendier and Stefan Nagel (see here for a summary) has shown that recession/depression era cohorts do have different investment habits (those experiencing macroeconomic hardship at young ages tend to be less risky and are less likely to participate in the stock market). Perhaps this extends to savings and spending behaviors, as well. Thoughts?
4 comments:
Yale can still afford major expenses and investments. But not cakes!
I will subsidize your cake, Atheen.
I've heard many people explain to their parents' or grandparents' frugality by saying they lived through the great depression - they never spend money, never throw anything away, don't put their money in banks. the cohort is probably dying out as most of the people I have met like that are in nursing homes, but perhaps a new generation is being bred at the moment.
That's really interesting, Valli. You should definitely check out the linked paper. They don't look at Depression cohorts, per se, but all individuals that lived through hard times across a sample of countries.
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