I’m generally a big fan of Rick Bookstaber. His posts have a depth and originality that’s rare among economics blogs. But he goes seriously off the rails with this one, on commodity prices. In the long term, he argues, they are bound to fall, because a paradigm shift is underway:
with the increased focus on technology – where we spend more and more of our time on our cell phone, doing emails, watching DVDs and surfing the web – there is less of a difference between how the super rich and the reasonably well off spend their time hour by hour during their typical days. … in the not-so-distant future the main items we will demand, beyond food, clothing and shelter, are “game systems”…
Our demand for housing and transportation, two of the biggest commodity hogs, will be lower. McMansions will be totally passe. It should already be dawning on people that most all of our non-sleeping hours at home are spent in the kitchen and its adjacent family room. Living rooms and dining rooms are relics.
This is a classic example of what we might call Dow 36,000 syndrome, after the perfectly timed punchline to the tech bubble, which argued that stocks were no riskier than bonds and should be priced accordingly, people just hadn’t realized it yet. The syndrome consists of coming up with a theory that implies people will behave quite differently than they do, and then, rather than concluding there must be something wrong with the theory, predicting that people will start behaving in accord with it any day now. There’s no explanation for why people haven’t followed the theory up til now, just the assurance that they’re about to, just wait. Tomorrow, tomorrow, people will realize stocks should be priced like bonds. And they’ll realize there’s no reason to have a bigger house than you need for your daily routine.
I don’t think so.
I happen to be sitting, as I type this, in a bedroom in John D. Rockefeller’s old 40-room mansion in Pocantico.I don’t know how much time he spent in most of those rooms … or in the enormous coachhouse down the hill … or in the “Orangerie, modeled after the original at Versailles” … or in the guesthouse, the consumption value of which presumablydidn’t much depend on the fact that it was initially exhibited at the Museum of Modern Art and then disassembled and shipped to the estate.
There may be a paradigm shift that leads to decreasing demand for commodities. I hope so; sooner or later, there needs to be. But Bookstaber, smart as he is, is being too much of an economist here. Anyone who thinks that the consumption of the rich (or of those in status competition with the rich) can be derived from some rational assessment of what a person needs, has not grokked what being rich is about.