Economics Gurus, a question....

[phattonez]

The common misconception is that saving money is the same as investing. When you clumped them together :

As described in another post: saving money when short term rates are at zero along with a money multiplier at or below one is in fact hording.

I clumped them together, but I made specific reference in this thread about how they are different.

 

[phattonez]

Median household income is near or below 2000 levels.

Household income is a farce of a measure and you know it.

 

[oldreliable67]

Household income is a farce of a measure and you know it.

I don't know it. How so?

 

[Kushinator]

I clumped them together, but I made specific reference in this thread about how they are different.

Yet you failed to identify the effect of saving during a liquidity trap (or when short term rates go low and cannot stimulate aggregate demand). In that sense, saving money is hoarding! So lumping them together was invalid since you decided to including the function of hoarding (err saving in the current environment).

Clarification was needed at that point.

 

[Kushinator]

Household income is a farce of a measure and you know it.

How about the incomes of the "rich"? How did they fare since 2000?

 

[phattonez]

I don't know it. How so?

Because the composition of a household changes over time. Not only the number, but the number of people working in the household.

 

[phattonez]

How about the incomes of the "rich"? How did they fare since 2000?

It's useless to follow incomes by group because the composition of the group changes with time.

 

[Kushinator]

It's useless to follow incomes by group because the composition of the group changes with time.

That's hardly a valid critique if you are unable to identify these differences.

 

[oldreliable67]

Because the composition of a household changes over time. Not only the number, but the number of people working in the household.

The composition of households do indeed change over time; typically a very long time, sometimes generational. I don't believe that invalidates household income or renders it farcical. Instead, I think it makes it all that more interesting as economic phenomona. Household composition reflects sociological shifts and demographic trends as well as economic well-being (or lack thereof), suggesting that a study of household income relative to household composition might offer valuable insights.

 

[phattonez]

The composition of households do indeed change over time; typically a very long time, sometimes generational. I don't believe that invalidates household income or renders it farcical. Instead, I think it makes it all that more interesting as economic phenomona. Household composition reflects sociological shifts and demographic trends as well as economic well-being (or lack thereof), suggesting that a study of household income relative to household composition might offer valuable insights.

But why use household instead of individual income since it is the individuals who make decisions, not households?

 

[phattonez]

That's hardly a valid critique if you are unable to identify these differences.

A rich man one year becomes a poor man the year after. It happens all the time. Census bureau data for following incomes is worthless. IRS data gives you much more meaningful results.

 

[Kushinator]

A rich man one year becomes a poor man the year after. It happens all the time. Census bureau data for following incomes is worthless. IRS data gives you much more meaningful results.

Simply stating something is worthless is a weak attempt to dismiss an argument for which you have no counter. Why not identify these "changes" instead of making arbitrary comments?

 

[phattonez]

Simply stating something is worthless is a weak attempt to dismiss an argument for which you have no counter. Why not identify these "changes" instead of making arbitrary comments?

In fact I just made a thread about this very issue.

http://www.debatepolitics.com/economics/81991-following-income-some-problems.html

 

[oldreliable67]

But why use household instead of individual income since it is the individuals who make decisions, not households?

More accurately, I believe, it is typically the head of a household that makes most decisions. And of course that person can change from time to time, from a partiarch to a matriarch or an offspring becoming the principal caregiver to elderly parents or siblings (especially relevant now and in the coming years with the "graying" of our population and what that implies for various entitlement programs).

Monitoring households is also especially important in housing, where household formation has been particularly relevant.

 

[phattonez]

More accurately, I believe, it is typically the head of a household that makes most decisions. And of course that person can change from time to time, from a partiarch to a matriarch or an offspring becoming the principal caregiver to elderly parents or siblings (especially relevant now and in the coming years with the "graying" of our population and what that implies for various entitlement programs).

Monitoring households is also especially important in housing, where household formation has been particularly relevant.

But it doesn't make any sense. How long does a household last for? Kids are born, kids go to college, kids work, parents retire, grandparents retire. There is just too much going on to make valid conclusions. Why not just look at units that are the same and that do not change over time, namely individuals?

 

[oldreliable67]

But it doesn't make any sense. How long does a household last for? Kids are born, kids go to college, kids work, parents retire, grandparents retire. There is just too much going on to make valid conclusions. Why not just look at units that are the same and that do not change over time, namely individuals?

Because individuals become part of households and then perhaps form their own households. The change is just as important as the aggregates. See response on your new thread...

 

[phattonez]

Because individuals become part of households and then perhaps form their own households. The change is just as important as the aggregates. See response on your new thread...

So going into a household means they no longer act as individuals? All of the choices are as a household unit? That's not the way it worked in my family. My mom had plenty of purchases without my dad knowing and vice versa.

 

[oldreliable67]

So going into a household means they no longer act as individuals? All of the choices are as a household unit? That's not the way it worked in my family. My mom had plenty of purchases without my dad knowing and vice versa.

No, no, no! Please don't extrapolate to absolutes or absurdities! Of course households contain individuals making spending decisions for themselves, especially for matters than concern them at a personal level and for which they expend funds they have earned. However, sociologists tell us that family units/households often have a 'head of the household' who is instrumental, and often the final arbiter, of major spending/saving decisions affecting the entire household.

Sociolgists also tell us that the increased number of households with two or more incomes has increased the decentralization of spending decisions in favor of the indivuals in the household unit. However, in years past, when one-income households were more dominant, and where they still exist today, spending decisions were and are much more likely to be centralized, with the sole 'bread-winner' making the large majority of spending decisions.

 

[phattonez]

No, no, no! Please don't extrapolate to absolutes or absurdities! Of course households contain individuals making spending decisions for themselves, especially for matters than concern them at a personal level and for which they expend funds they have earned. However, sociologists tell us that family units/households often have a 'head of the household' who is instrumental, and often the final arbiter, of major spending/saving decisions affecting the entire household.

Sociolgists also tell us that the increased number of households with two or more incomes has increased the decentralization of spending decisions in favor of the indivuals in the household unit. However, in years past, when one-income households were more dominant, and where they still exist today, spending decisions were and are much more likely to be centralized, with the sole 'bread-winner' making the large majority of spending decisions.

But the point remains (without getting into any criticisms of methods of sociology) that within the unit of the household people make their own decisions. To look at a household as an individual actor blinds us to so much interesting information about the individual actors. In the end, it is not households that act, as households are just a sociological contruction. It is the individual the is the ultimate actor, and the individual to whom we should direct our studies.

 

[UtahBill]

But the point remains (without getting into any criticisms of methods of sociology) that within the unit of the household people make their own decisions. To look at a household as an individual actor blinds us to so much interesting information about the individual actors. In the end, it is not households that act, as households are just a sociological contruction. It is the individual the is the ultimate actor, and the individual to whom we should direct our studies.

Here I am responding to an off topic post in my own thread....
Bear in mind that people often make decisions with inadequate information/knowledge to make good decisions.
In the household of my childhood, only 2 of 6 act like they have brains, the rest are barely getting by.
Even when some people KNOW when and where they went wrong, they can't back up and reset, they just keep going down that wrong road.

Back to somewhat closer to the OP.
I would like to see a larger, stronger middle class. It is the backbone of our economy. The poor can't contribute much, the rich go to extremes to avoid contributing. Guess who is left?

 

[phattonez]

Here I am responding to an off topic post in my own thread....
Bear in mind that people often make decisions with inadequate information/knowledge to make good decisions.
In the household of my childhood, only 2 of 6 act like they have brains, the rest are barely getting by.
Even when some people KNOW when and where they went wrong, they can't back up and reset, they just keep going down that wrong road.

Who continues to make the same bad decision? No one. If you think it's a bad decision, you're probably ignoring the personal gain that cannot be measured in dollar terms.

Back to somewhat closer to the OP.
I would like to see a larger, stronger middle class. It is the backbone of our economy. The poor can't contribute much, the rich go to extremes to avoid contributing. Guess who is left?

Provide statistics to show that the middle class is shrinking.

 

[UtahBill]

Who continues to make the same bad decision? No one. If you think it's a bad decision, you're probably ignoring the personal gain that cannot be measured in dollar terms.



Provide statistics to show that the middle class is shrinking.

First, provide a post where I said it is shrinking....Last, do your own research....

 

[phattonez]

First, provide a post where I said it is shrinking....Last, do your own research....

You said we need a larger, stronger middle class. From the statistics that I see, the middle class is growing and succeeding. So why make a comment if we already have what you want?

 

[UtahBill]

You said we need a larger, stronger middle class. From the statistics that I see, the middle class is growing and succeeding. So why make a comment if we already have what you want?

You are playing with words. It can be strong relative to other countries, but still need to be stronger.
Did you try googling "shrinking middle class"? Or "Income gap in America"......If you don't look for it, you won't find it....

 

[oldreliable67]

But the point remains (without getting into any criticisms of methods of sociology) that within the unit of the household people make their own decisions. To look at a household as an individual actor blinds us to so much interesting information about the individual actors. In the end, it is not households that act, as households are just a sociological contruction. It is the individual the is the ultimate actor, and the individual to whom we should direct our studies.

If you would read a little more carefully, you would find that we don't disagree that individuals within a household make their own decisions with respect to decisions that affect them and only them.

However, you seem to feel that decisions that affect entire households are made in a vacuum and are not worthy of study. This attitude certainly flies in the face of substantial and persuasive evidence that household incomes and household formations substantially impact many facets of our economy and are therefore worthy of study.

Want a new family car? Mom wants a new washer and dryer? Dad wants to upgrade from a push mower to a riding mower? Want to move to a larger house or to a different neighborhood? Dad or mom wants to take a new job in a different city? These are just a few of the spending decisions that are rarely made unilaterally, by a single unit within a household.

Notice the "rarely" qualification: of course there are exceptions. Even today with the greater prevalence of multi-income households there no doubt remain some autocratic household units. Even then, I would posit that spending decisions are mostly made with the benefit to the entire household as the primary motivation.