A Great Depression for rich people

What does a Great Depression for the relatively wealthy look like?  If you spend lots of your budget on  "luxuries" — especially durables — it is easy to postpone their consumption.  This might cause gdp to fall more rapidly than if people were poorer.  If you are spending most of your money to eat and stay alive, and a negative shock comes, you have to work harder to make up the difference.

It's so, so easy to put off the purchase of a new car.  And that makes for a steep ride down, most of all for the geographically distant producers of durable goods.  Whether the steep economic plunge is worse in utility terms is debatable but maybe not because wealth buffers are better built up.

On the other hand, the presence of so many wonderful free goods allows for easy substitution into activities which do not generate much economic revenue or employment.

For these ideas I am indebted to a conversation with Arnold Kling and Seth Ditchik, just before we ate superb barbecue at Oklahoma Joe's, get the ribs and french fries.


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