From: glevy@PRATT.EDU
Date: Sat Nov 26 2005 - 09:26:21 EST
---------------------------- Original Message ------------------------- Subject: A class dimension of aggregate demand From: "Jurriaan Bendien" <adsl675281@tiscali.nl> Date: Sat, November 26, 2005 5:52 am ----------------------------------------------------------------------- If you look at the table following the link I provided, you will see that the *average* after-tax income of those consumer units (households) earning less than $70,000 was $28,752 . Yet, the total consumer expenditure of those households averaged $31,737 . In other words, on average, these consumer units purchased consumer items in 2003 to a value *greater* than their net income. We're talking 73.6 million households, here, or about 190 million people or so. This discrepancy is conceptually possible, because the survey includes durables bought during the reference year on hire-purchase, installment, credit etc. such as cars, appliances and furniture (even although it excludes expenditures on repayments of items bought. I am not exactly sure, what is included in the largest single item of consumer expenditure - housing - but presumably it includes only actual payments made by consumer units during the year in respect of housing. I think you can find some evidence of Engel's curve in the data, but high-income households evidently spent e.g. more money eating out rather than cooking at home, with the consequence, that they spent proportionately more money on food, than if they ate at home all the time. And, of course, they'd be more likely to buy a BMW rather than a little Subaru. One thing that is remarkable about this data set is how low the average disposable income of the majority of US households actually is, i.e. they're more or less forced to buy on credit. Thus, when bourgeois intellectuals complain about the "low savings rate" of Americans (disregarding their payments on social security, health insurance and mortgages, "saved" from gross income), what they forget is the real household distribution of disposable income among the population, and its average level for those households earning below $70,000. It''s almost impossible to disaggregate "luxury consumption" reliably from official data, and I agree that what is regarded as "luxury" and what is "necessity" is to some extent dependent on your point of view and circumstances. Keynesians will talk about aggregate demand, Marxists will decry the evil of Keynesianism, but socialists seek to study the distribution of income among social classes, in which case, quantative and qualitative questions arise about "whose" demand it is, "what kind" of demand it is, and "how" this demand is realised/manifested. Obviously it takes much more research to allocate income quantities to social classes defined in terms of relations of production. Although Marx defined the economy as the totality of the spheres of production, distribution, circulation and consumption, he did not write on the political economy of consumption. But of course that does not need to imply that there is no class dimension in aggregate demand, unless one believes that the critique of political economy should stop when the ink dried on the last page Marx wrote on. The point is that aggregate demand is a concept which conveniently spirits away the differential propensity of social classes to save and consume, in accordance with their incomes. Regards Jurriaan
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