4 ms·

It seems like an implicit premise in that line of reasoning is that consumers have a choice: they can increase their spending if they want a quality upgrade, or

It seems like an implicit premise in that line of reasoning is that consumers have a choice: they can increase their spending if they want a quality upgrade, or they can forgo the upgrade and keep their spending relatively constant. In some cases, though, there often isn't much of a choice. I can't buy a (new-ish) car without a rear-view camera, now that they're mandated. I can't hire a builder and tell him that I don't need GFCI outlets, or HVAC, or fire sprinklers; it's all required by code. If I wanted a ~1000 square foot house, I could have built one 50 years ago, but today my planning department wouldn't approve. Similarly, I might have been content with the experience of using my iPhone 4 back in 2010, but I can't recreate that for much cheaper today. Even if I could buy an iPhone 4 for cheap, it no longer receives security updates, and many apps have dropped support, or at least focus their QA on newer devices. Or I might have been content with the 2mbps connection my ISP offered back in 2000, but now their plans start at 50mbps. Even if I could find a cheap 2mbps plan, it wouldn't be as practical given the bloated state of websites today. (I mean it's doable, buy my quality of experience would be much lower than it was in 2000.)

owenversteeg 6y ago
Well, except that you do have that choice in most things. You can buy a used car without a rear-view camera, or keep your older car - and many people do. If you want a cheap smartphone, you can get one - I recently had a Nokia 1 (cost me 24 euros!) as an experiment, and it worked fine. If you're content with a TV from 2001, you can get one for free off Craigslist. The reason I like the car as an example is because it is a quality upgrade and also a lower cost. A vehicle with more than twice the lifespan translates directly into cash in your pocket. You save cash on a regular basis by not needing to purchase a quart of oil a week, 11 hours of mechanic time (while the car is still new!), more expensive tires, more spark plugs, more coolant, etc. I get your point that quality upgrades are _occasionally_ mandatory, but the majority are not. If you want to save money by skipping the improvements (get a TV, flashlight, keyboard etc from 2001, or a more spartan smartphone) - go ahead, plenty of people do, and they save money for it. But if you want the latest tech, and a palace on wheels, and international travel, and organic food, and a fancy university on your resume, well, those things cost money. Fun fact - community college enrollment has dropped year over year for about a decade now (today it stands at almost half of its peak enrollment.) There are plenty of budget smartphones, but the most popular phone in the world by far is the non-SE current-year iPhone, costing $800 to $1600 depending on configuration and the place you buy it in. A safety razor is cheap and effective (I use one) but Gilette sells millions of copies of expensive razors. The American middle class, in particular, wants to consume at a very high level, increasing every year, and it will not be satisfied with less. Interestingly, this consumption has shaped the political debate on the American left. Student loan forgiveness, which as planned today would be a colossal handout to the upper middle class, is wildly popular. Money for the millions of Americans living in true poverty is discussed nowhere, while left circles are furious that couples making 160k won't get any extra thousands with the latest stimulus bill.
- dlubarov 6y ago
  True for now, but there's a limited and ever-decreasing supply of older cars without rear-view cameras, small homes without HVAC, etc. Today it's hard to buy a car (in decent shape) without airbags; I expect that in 20 years it will be hard to buy one (in decent shape) without a rear-view camera. Fair point about lower maintenance costs though.
  - owenversteeg 6y ago
    Your problem is ignoring depreciation. Yes, you may pay more if you buy a new car today with X flashy feature, but that will have little bearing on its used price in two decades, because the flashy features depreciate at a rate far faster than the feature of the car, y'know, actually moving. In 20 years from now, if you buy a $1000 cheap beater car it will not be $600 of car and $400 of backup camera, it will be $990 of car and $10 of backup camera. The same for airbags (the US GAO estimated they added $300 to the manufacturers' costs) - a $1000 car is not $700 of car and $300 of airbags. (Also, the rear view camera is a tiny, tiny fraction of the car's manufacturing cost. Yes, as an option it costs $xxx, but option sticker prices are nowhere the actual cost of the option.)

owenversteeg 6y ago

Well, except that you do have that choice in most things. You can buy a used car without a rear-view camera, or keep your older car - and many people do. If you want a cheap smartphone, you can get one - I recently had a Nokia 1 (cost me 24 euros!) as an experiment, and it worked fine. If you're content with a TV from 2001, you can get one for free off Craigslist. The reason I like the car as an example is because it is a quality upgrade and also a lower cost. A vehicle with more than twice the lifespan translates directly into cash in your pocket. You save cash on a regular basis by not needing to purchase a quart of oil a week, 11 hours of mechanic time (while the car is still new!), more expensive tires, more spark plugs, more coolant, etc. I get your point that quality upgrades are _occasionally_ mandatory, but the majority are not. If you want to save money by skipping the improvements (get a TV, flashlight, keyboard etc from 2001, or a more spartan smartphone) - go ahead, plenty of people do, and they save money for it. But if you want the latest tech, and a palace on wheels, and international travel, and organic food, and a fancy university on your resume, well, those things cost money. Fun fact - community college enrollment has dropped year over year for about a decade now (today it stands at almost half of its peak enrollment.) There are plenty of budget smartphones, but the most popular phone in the world by far is the non-SE current-year iPhone, costing $800 to $1600 depending on configuration and the place you buy it in. A safety razor is cheap and effective (I use one) but Gilette sells millions of copies of expensive razors. The American middle class, in particular, wants to consume at a very high level, increasing every year, and it will not be satisfied with less. Interestingly, this consumption has shaped the political debate on the American left. Student loan forgiveness, which as planned today would be a colossal handout to the upper middle class, is wildly popular. Money for the millions of Americans living in true poverty is discussed nowhere, while left circles are furious that couples making 160k won't get any extra thousands with the latest stimulus bill.

dlubarov 6y ago
True for now, but there's a limited and ever-decreasing supply of older cars without rear-view cameras, small homes without HVAC, etc. Today it's hard to buy a car (in decent shape) without airbags; I expect that in 20 years it will be hard to buy one (in decent shape) without a rear-view camera. Fair point about lower maintenance costs though.
- owenversteeg 6y ago
  Your problem is ignoring depreciation. Yes, you may pay more if you buy a new car today with X flashy feature, but that will have little bearing on its used price in two decades, because the flashy features depreciate at a rate far faster than the feature of the car, y'know, actually moving. In 20 years from now, if you buy a $1000 cheap beater car it will not be $600 of car and $400 of backup camera, it will be $990 of car and $10 of backup camera. The same for airbags (the US GAO estimated they added $300 to the manufacturers' costs) - a $1000 car is not $700 of car and $300 of airbags. (Also, the rear view camera is a tiny, tiny fraction of the car's manufacturing cost. Yes, as an option it costs $xxx, but option sticker prices are nowhere the actual cost of the option.)