The economics of stuff, or secular stagnation and cast iron frying pans

Dan here…When in Fort Lauderdale, FL to visit a son and his girlfriend this Christmas, I ran into the phenomenon of ‘lots of stuff’ as they furnished their new apartment. Both real estate turnover and ‘used furniture’ were thriving industries, I assume partly from the turnover of ‘snowbirds’ and younger folk offering services to this older population. (update:typos corrected)

Frances Woolley at Worthwhile Canadian Initiative points us to another look at this idea of the economics of stuff…

This post could have been called, “Secular Stagnation and Cast-Iron Frying Pans”. Secular stagnation is sometimes thought to be caused by an imbalance between savings and business investment. The economics of stuff explains secular stagnation in terms of household investment, that is, investment in consumer durables.

Buying cast-iron frying pans is a form of investment – one that pays dividends for decades in the form of excellent grilled cheese sandwiches. But I already own three cast-iron frying pans – I’m not planning on buying any more for the foreseeable future.

The economics of stuff suggests secular stagnation is due to deficient population growth, as well as population aging. It doesn’t matter how many old people there are, as long as the population is growing, young people will come along who will need to buy stuff. But if there is no net population growth – or if the number of old people exceeds the number of young people – the young no longer need to buy stuff. They can get all the cast-iron frying pans (and furniture and wine glasses and vinyl LPs) they need from old people. Who are happy to get rid of it.

All of what I’ve written here is basically common sense, but it points to two limitations in the micro-foundations of other explanations of secular stagnation. First, because other explanations fail to take into account the limitations of people’s capacity to store stuff, and people’s (irrational) aversion to getting rid of stuff, they fail to predict the extent to which people’s demand for new stuff falls over time. Second, they treat “consumption” as something that lasts one period and then disappears. That’s wrong.

Stuff is messy and hard to deal with. But that’s not an excuse for tossing it out of economic analysis.

Lifted from comments at Worhwhile Canadian Initiative:

rjs says….

How can anyone be happy w/o a cast-iron frypan? Only way to do steak..or lamb chops or soda or potato farls..
2) thru 6) suggest that maybe “lower rates of economic growth” are not necessarily the end of civilization as we know it, but may actually be accompanied by an increase in that elusive observable “contentment”.

Self Storage Association and The Economist add extra information.

The self storage industry in the United States generated more than $24 billion in annual U.S. revenues (2013 – estimate). The industry has been the fastest growing segment of the commercial real estate industry over the last 40 years and has been considered by Wall Street analysts to be “recession resistant” based on its performance since the economic recession of September, 2008. The industry pays more than $3.25 billion each year in local and state property taxes.