POST-2008 | Shift to Thrift

One of the joys of being interviewed in the mainstream media is you hear from friends with wise or witty reactions. I got a nice note from Dick Roberts about the NY Times quoting me in the Economists’ Forecast story yesterday:

Delighted that the Times saw fit to consult you. The photo adds authenticity.

Dick wrote a response to my somewhat bearish perspective on New York City. He could also have been responding to Ann Medlock's salute to the coming return to fashion of the forgotten virtue of thrift. After all, the only 2008 winners among Dow stocks are the two retailers, Wal-Mart and McDonalds, that cater to thrifty consumers.

Dick, who is my frequent summertime tennis partner, provides a warning about the excesses of thrift:

Since most of the issues confronting us have their analogy in tennis, consider the consequences of players, who feeling poor, play a few extra sets with a can of balls they would have discarded in more opulent times.

A seemingly innocuous bit of domestic thrift could have, alas, serious consequences:

Since the balls have less bounce, the players stretch too far and run too fast, leading to injuries, thereby imposing additional costs on insurers, Medicare, and personal savings. Result: diminished funds available to purchase consumer goods. Result: retarded growth in the US economy, reduction of imports. Result: acceleration of recessions in Asia, Europe, third world. Result: social unrest in Mideast, unemployment in China, possible regime changes in unstable countries. All for the want of a horseshoe nail. What can you and I and our spouses do to reverse this trend?

Dick's warnings are a stretch but I actually worked on a study of this kind at the NYC Comptroller's Office in 1995, on the "Net Loss" from some budget cuts. The study is likely to get dusted off by agencies facing cuts because of looming gaps in state and city budgets. Thank you Dick, for reminding me to flag the report!