Tuesday, January 27, 2009
It's January, 2009, and the USA is in one of the worst recessions anyone can remember. Comparisons are made to the dot-com crash of the early 2000s, the awfulness of the early 1980s, and all the way back to the Great Depression itself in the 1930s.
This all leads to my question for the philosophers: Should you intentionally spend less money in a recession?
Of course, if you've lost your job or some of your income, you'll have to make tough choices. But I'm imagining a person who hasn't had their income affected at all. (Presumably their savings have dwindled, but let's say they don't live off that savings and can reasonably expect to wait out the recession before they plan to retire or otherwise draw on their savings. Let's also assume that have a high degree of job security.) If you are making exactly as much money as you were last year, why should you spend any less? Why should the fact that other people are buying fewer things lead you to buy fewer things?
There's one easy way to spend less without making any sacrifices. As retailers work to move their merchandise, they're having greater sales than past years. So if you buy a sweater for $40 that would have been $50 a year ago, you are spending less. So that's easy to do. But I take it that people have stopped buying sweaters (or cars or most non-necessities). But is this rational? If you are making just as much money as you were before, why would you spend less now? Perhaps you are a super-saver and think this is a good time to invest, but I don't think that's why most people are holding onto their money.
Besides the usual reasons to save money and be thrifty that apply at all times, and the ways one can easily spend less, and the greater need to be generous, should you buy less in a recession?