RE: The Absolute Income Hypothesis in Economics
AIH is really a 5th wheel.
It is only a general trend caused by other factors, and not a hypothesis that stands on its own.
It has more to do with the national savings rate and marketing.
Eighty years ago, you made do, or you did without.
Saving every penny was the word of the day.
Today a penny is worthless. Savings are quickly eroded.
And the word of the day is keep up with the card-ass-ians.
In today's economy, of course people spend everything they get.
It takes everything they have to almost have a good standard of living.
AIH breaks down in two huge areas, pretty much disproving it.
As you get above about $70k in income, you do not really spend more as you increase your income.
The rich do not increase their food budget every time they get more money. And really, you run out of things to buy as you get over 10 million.
The other side is minimalists. Who tend to either make just the minimum needed to survive, or stash away all the extra to retire early.
In total, i believe that AIH has more to do with planned obsolescence than anything it reports to be tracking.
@builderofcastles. Well, think about the average people, every person in the world are not rich people. I might have given large amount of income my example but think clearly and rationally, what can be the average income of the person in the developing countries or under developing countries? In every economy the number of rich people are far less than poor people.
The average normal people will always increase their consumption if their income increases. It is vastly related in the practical life.
If you are from the well developed countries you might not encounter this, like you said rich do not increase their consumption if they get more money, this can be true. Because they have already got everything or every desired utilities.
But all the poor people who wants to fulfil their desires will always increase consumption if their income increases. It's highly relatable.
What do you think Mr. @greenman regarding this?
Think about the great depression era poor people.
When coming out of the depression, they saved every penny.
About this time they introduced plastic containers for selling stuff in.
And the people would save these containers, and so spending on containers went down.
These people had to be propagandized into throwing the plastic containers away.
AIH has more to do with the rise of marketing firms and planned obsolescence. This theory is just to cover over the real crime.
Alright😅 Let's have an in-depth explanation regarding this. First of all, what does AIH actually says? It suggests that a person's consumption patterns are based on their current level of income rather than their relative income or wealth. So it can be said when an individual's income increases their consumption will also increase but at a decreasing rate.
As you said, the rise of marketing firms and planned obsolescence is not directly related to AIH but rather relevant. It is possible that marketing firms use AIH to develop marketing strategies that target consumers based on their income levels. For example, a luxury car brand might target high-income consumers with advertising that emphasizes the exclusivity and prestige associated with owning a luxury vehicle.
Similarly, planned obsolescence is a marketing strategy used by manufacturers to encourage consumers to replace their products more frequently. This can lead to increased consumption and sales for the manufacturer.
The AIH might suggest that as consumers' incomes rise, they are more likely to replace products more frequently, as they can afford to do so. But it's worth noting that planned obsolescence is not solely driven by the AIH, some other factors such as technological advancements and changing consumer preferences, also contribute to the phenomenon.
So, we can say the AIH is not directly related to the rise of marketing firms and planned obsolescence. It's possible that these phenomena are influenced by consumers' income levels, which is a crucial component of the AIH.
Absolutely, most people in the developed world don't even know that the vast majority of the worlds population are very poor and lucky to have the right amount of food or a decent dwelling.