[Paleopsych] NYT: Virginia Postrel: The New Trend in Spending
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Thu Sep 16 18:54:44 UTC 2004
Virginia Postrel: The New Trend in Spending
New York Times, 4.9.9
By VIRGINIA POSTREL
LISTEN to the jobs debate carefully, and you might get the idea that
the problem with the economy is that Americans just are not
We spend too much of our income on restaurant meals, entertainment,
travel and health care and not enough on refrigerators, ball bearings,
blue jeans and cars.
Manufacturing employment is sluggish because of rising productivity -
making more with fewer people - and foreign competition. But that's
not the whole story, especially over the long term. Production is
changing, but so is consumption.
As incomes go up, Americans spend a greater proportion on intangibles
and relatively less on goods. One result is more new jobs in hotels,
health clubs and hospitals, and fewer in factories.
In 1959, Americans spent about 40 percent of their incomes on
services, compared with 58 percent in 2000. That figure understates
the trend, because in many cases goods and services come bundled
Consider food, classified by the government's spending survey as a
In 1959, consumers spent 25 percent of their income on food, compared
with 14 percent in 2000. Today food spending looks much smaller if you
exclude restaurant meals. Meals at home took 19 percent of income in
1959, compared with only 8 percent in 2000.
Another way to look at the same trend: In 2000, we spent 41 cents of
each food dollar on restaurant meals, up from only 29 cents as
recently as 1987.
Restaurant meals have changed, too. More and more of their value comes
not from the nutrition and dishwashing services - function - but from
the experience the restaurant provides. We don't go out to eat just to
avoid cooking. We go to enjoy different cuisines in pleasant
For successful restaurants, aesthetics is no longer an afterthought.
Customers are paying for memories, not just fuel.
What's true for restaurants is true across the economy. New economic
value increasingly comes from experiences.
Americans have not stopped buying stuff, of course. (Indeed, there's a
whole industry devoted to organizing our pantry-like closets.) But the
marginal value of tangibles versus intangibles has shifted. That many
manufactured goods are also getting cheaper only intensifies the
Products as well as services increasingly distinguish themselves
through aesthetics, adding emotional value to practical use. This
trend confounds those who equate "quality" with function.
Hence a recent Dilbert comic strip satirizes a product designer who
declares: "Quality is yesterday's news. Today we focus on the
emotional impact of the product."
In fact, the trend toward emotional value is exactly what
psychological research would predict. Particularly as incomes rise,
people find that additional experiences give them more pleasure than
In research reported last year in the Journal of Personality and
Social Psychology, Leaf Van Boven of the University of Colorado,
Boulder, and Thomas D. Gilovich of Cornell University used two surveys
and a lab experiment to test whether people reported greater happiness
from "experiential purchases" or "material purchases." In almost all
cases, they found that subjects preferred experiences to goods. (The
psychologists did not consider relative prices, except to specify that
survey respondents consider purchases they'd made for more than $100.)
That does not mean nobody wants more things. The issue is one of
relative benefits. The economic question is, Given limited resources,
what is the best trade-off? What do you want next?
The two psychologists' research found that the less people already
had, the more benefits they reported from additional goods as opposed
"Respondents' level of income was positively associated with their
endorsement of experiential over material possessions," the
psychologists wrote, noting that "respondents with the lowest levels
of income were equally likely to indicate that material or
experiential purchases made them happier."
As an economist would put it, this research found diminishing marginal
utility - less enjoyment from an additional purchase - from new
possessions, compared with experiences like travel and restaurant
meals. "The good life," the authors wrote, "may be better lived by
doing things than by having things."
This result sounds both logical and humanistic. It's consistent with
economic theory. But translated into economic life, it disrupts
In the popular imagination and the political debate, making things is
"real" work. Providing experiences is not. Analysts assume that
working in a factory is a good job and working in a hotel is not.
This perception is not just a question of relative wages. Even at the
top, it's more prestigious to create stuff than experiences.
Carleton S. Fiorina, the chief executive of Hewlett-Packard, ranks
10th on the new Forbes list of "the world's most powerful women."
(She's the top-ranked business executive on the list.) Oprah Winfrey
ranks a mere 62nd, and isn't even classified as an executive.
Similarly, the election-year news suggests that the economy is bad all
over. But in fact, states like Florida and Nevada, whose economies
produce experiences, are booming. States like Ohio and Michigan, whose
economies produce stuff, are hurting.
The shift toward intangibles creates geographic winners and losers,
redistributing economic and political clout.
Over the last eight years, the demographer Peter Francese reports,
"people have been moving out of the Northeast and Midwest at a net
rate of just over 30,000 a month." In the July/August issue of
American Demographics magazine, he documents the story of "young
people pulling up stakes in the Northeast and Midwest and dispersing
to better jobs and more affordable places to live, where the weather
often happens to be a lot better."
Americans are pouring out of the Northeast and Midwest, where water
and rail transportation and convenient raw materials once provided an
economic advantage. They're going to the more hospitable physical and
economic climates of the South and West.
There, catering to emotion and imagination is "real" work and pleasure
is a form of quality.
Virginia Postrel (www.dynamist.com) is the author of "The Substance of
Style: How the Rise of Aesthetic Value Is Remaking Commerce, Culture
and Consciousness," just published in paperback by Perennial.
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