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February 04, 2008


Matthew Sinclair

Very good post.

A couple of quick potential issues:

Continued retail spending and increased personal debt could, under the permanent income logic, make quite a lot of sense with stalled real incomes of the kind the CPS describe. People could be assuming that real incomes will start to rise again and trying to smooth consumption growth.

While "what about consumption" questions undermine the case for stalling disposable incomes they also undermine the case that inequality is rising. Just something to think about. I know there has been interesting research on this in the US.

Mark Wadsworth

Ta muchly for link in side bar!


Thanks, chaps.
Matthew - I suspect your first point might be right. The interesting question is why? Are people anticipating lower taxes, or just sustained stable growth, or technical progress and productivity growth, or what?
I'm not sure if aggregate consumer spending can tell us much about equality. But it's certainly true that inequality in consumption is less than income inequality (and inequality in subjective well-being FWIW is lower still).

Peter Risdon

"In presuming that people were wrong to spend and borrow, how are economic liberalism and individual choice being championed?"

Because this isn't liberalism at all, but rather toryism in disguise - something that has become depressingly familiar.


They switch between the median and mean rather too much for my liking - their initial analysis (tables 1 and 2) is based on medians but you are right the tax bit (table 3) is based on means.

I'm not sure you are right on the mortgage bit, as the survey is only interested (in tables 1 and 2) with homeowners and apparently then the average mortgage is £125k, which works out on their figures.

I did wonder where the money in mortgage payments shows up as a credit, though.


Actually the average mortgage for a homeowner is £125k, I'm not sure what the median would be. Again they're switching around.


People should stop using means full stop. I'm f...ing well not interested in the very rich.

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