

Rethinking the American consumer - cwan
http://www.economist.com/blogs/freeexchange/2009/10/rethinking_the_american_consum.cfm

======
jerf
Housing is a necessity. A given house is not. I find this article hard to wrap
my head around, as it really seems to be based on slipping in the idea that it
is impossible to cut your housing costs and then going from there to "panic!",
but that's not true. You can cut housing costs. You can control the costs of
quite a few "necessities" nowadays; very, very few Americans are truly buying
the absolute minimum "necessities". My wife and I have managed to cut quite a
bit of "necessity" out over the past few years, and economized on several
other "necessities".

~~~
martincmartin
If your mortgage is under water (i.e. the principal is more than the value of
the house), you can't sell your house. And a large percentage of American
mortgages are now under water.

~~~
jerf
Foreclosure is an option. If it's your only option, it sucks, but it is a way
to cut costs. Is it expensive in itself, given the damage it does to your
credit rating? Well, yes, but that doesn't mean it's not there, or sometimes
the best choice. Should you not have ended up in the position where that was
the best choice? Well, yes, but if that's where you are, that's where you are.

It's important to separate the ideal fact that you shouldn't be in that
position from the practical fact that it is indeed an option.

------
roc
Just because we spent as much yesterday as 20 years ago on consumer goods
doesn't mean that our spending _wasn't_ frivolous. Our essential costs
skyrocketed. We should've cut back.

------
sangaya
Housing costs are not always a necessity. The mean sq. footage of a house in
the United State went from 1,655 to 2,215 between 1978 and 2008. Did people
develop the necessity for larger and larger houses? Or did they _want_ larger
and larger houses?

I'll wager on _want_ over need. American culture is too often focused on
coveting what others have, and showing off success through the display of
material goods. The one case that can be made for larger houses is the number
of persons per household increasing from a mean of 2.67 (1987) to 3.88 (2008).
What do you all think?

True, it's harder to cut down the cost after making the mistake of buying more
house than can be afforded. Myself and plenty of other Americans instead chose
to buy more affordable, if less desirable, houses. For us, a large house is
not a necessity. (I live in a 900 sqft condo)

Sources: [<http://www.census.gov/const/C25Ann/sftotalmedavgsqft.pdf>]
[[http://www.census.gov/population/socdemo/hh-
fam/cps2008/tabA...](http://www.census.gov/population/socdemo/hh-
fam/cps2008/tabAVG3.xls)] [[http://www.nytimes.com/1987/04/15/us/average-size-
of-househo...](http://www.nytimes.com/1987/04/15/us/average-size-of-household-
in-us-declines-to-lowest-ever-recorded.html)]

~~~
sandrogerbini
"American culture is too often focused on coveting what others have, and
showing off success through the display of material goods."

Agreed, but its not just American culture that does this. The type of
conspicuous consumption you refer to was one of the major ideas behind the
economist Thorstein Veblen's The Theory of the Leisure Class. He claims that
it is human nature to emulate those of a higher economic class through
wasteful spending. Interesting stuff.

------
sandrogerbini
It was nice to hear that American consumers are not quite as prone to
frivolity as is commonly believed. At the same time however, this gives me a
sinking feeling -- the consequence is that individuals will find it far harder
to cut budgets on housing, transportation, and healthcare than on impulse
purchases like big televisions. We are, in fact, in worse trouble than we
thought. If you have seen suburbia recently, it shouldn't be too surprising to
find out that the 'necessities' have become more expensive; the past few
decades have seen bigger cars, homes, and commutes than ever before. In order
to downscale costs, there is going to have to be some serious downsizing, and
this is something that does not come easy for those in the land of the
supersizes (especially with regard to living in higher density/urban areas and
sourcing locally).

For me, the big take-away from this article is debt-financing. For many years,
the U.S. government and its average citizens has been spending beyond their
means - acquiring now and hoping to meet the mounting payments in the future.
This has certainly demonstrated itself to be a losing strategy, and a habit
that is especially difficult to kick. I am interested to see how this country
will rise to meet these challenges.

------
prat
"[A]s Elizabeth Warren has argued, the idea that most Americans have been
spending frivolously on consumer goods actually isn’t true. Instead, a hefty
chunk of the increase in consumption in recent decades has been the result of
higher housing prices"

I don't disagree, but past 1-2 decades have seen commoditization of housing,
housing and related products started to resemble more and more like consumer
goods in the U.S. than in any other country.

------
dkarl
Spending on health care is often frivolous. It's just that consumers have no
better alternative than to trust their doctor when their doctor tells them
that it's prudent to order an MRI, or that an expensive brand-name drug has
advantages over a generic alternative.

------
theli0nheart
The article doesn't bring up the fact that a majority of the people in
developed countries have plenty of resources to afford their needs. A house is
not a necessity. A car is not a necessity. And as one of the commenters
pointed out, the rising cost of health care must be in part attributed to
_better_ health care. It makes a difference, since many OTC drugs that we take
for granted today would be considered life-savers in the 1930s.

