Margins of Adjustment
Following a conversation with Arnold Kling and Seth Ditchik, Tyler Cowen suggests that this may be a "Great Depression for Rich People, because it's driven largely by huge cutbacks in luxuries. The bigger story, which Tyler hints at, isn't about rich people but about pretty much everyone in our very rich economy. We have lots of margins of adjustment--places we can cut back on spending without suffering serious hardship. For most people, cutting back doesn't mean deciding between food and rent but between manicures and lattes.
Consider this USA Today report on "small luxuries."
Think small, like Casey Elliott.
She's here picking up a tin of gourmet hot chocolate mix for her kids, a small but welcome treat at a time when her husband is out of work. "We're trying to do simple things, like going for family walks and playing games," she says.
She's buying gourmet hot chocolate mix. Did that margin of adjustment even exist 20 years ago (much less during the Depression)?