RE: workers' saving & Marxian political economy

["Devine, James" <jdevine@xxxxxxx>]

Mat writes:
> I like the classical/Marxian class-based approach
> supplemented with the
> Veblen-Duesenberry relative income hypothesis far more than the life
> cycle/permament income approach.

I think that all of these approaches have something to add. For example, the
permanent income hypothesis' emphasis on the smoothing of spending over time
applies best to the very rich, while the life-cycle hypothesis with
liquidity constraints fits working people better. (As Sweezy argues,
something like these combined produces a class-based consumption function.)
The relative income hypothesis works pretty well for the upper half, as
Julie Schor indicates in her book THE OVER-SPENT AMERICAN.

I wrote: >>I think that rich people are taught how to behave: for example,
they go to Phillips Exeter or some other prep school to learn "never to dip
into capital" and to live off income instead.<<

Justin writes:>My acquaintances and friends at Tigertown [Princeton] in the
mid 1970s who had gone to that sort of place learned no such useful things.
They learned a little Latin and a lot about exotic drugs and which girls'
prep schools had easy scores.<

yes, preppies are scum (present company excepted, of course). But I was
using prep schools to represent the entire system of social control that the
rich have tried to set up in order to perpetuate family fortunes (not that
it always works). One thing that's often done is to give the offspring trust
funds that limit how much they can spend.

Speaking of such, the richies (poor dears!) face a horrible dilemma: their
application of the "permanent income hypothesis" implies that they shouldn't
cut back on the cocaine and other luxuries when incomes fall in bad times,
but their "don't did into capital" strictures say that they shouldn't do
this too much. The difficulty of finding a balance is one reason why they
hire financial advisors.

Jim Devine,
reckless spender.