How Rising Inequality Stimulates Energy Demand. Robert H. Frank St. Gallen Symposium June 2, 2007. Which world would you choose?. World A: You and your family live in a 4000-square foot house, others live in 6000-square-foot houses.
Robert H. Frank
St. Gallen Symposium
June 2, 2007
World A: You and your family live in a 4000-square foot house, others live in 6000-square-foot houses.
World B: You and your family live in a 3000-square foot house, others live in 2000-square-foot houses.
C: You have 2 weeks of vacation each year, others have 1 week,
D: You have four weeks of vacation each year, others have 6 weeks?
Leisure = nonpositional good
Self-interested demands will result in a socially efficient allocation.
Traits that benefit individuals often work to the disadvantage of groups.
Very little sexual dimorphism in monogamous species like the albatross.
= a positional good
Minimizing the risk of death from predators
= a nonpositional good
Robert H. Frank.“The Demand for Unobservable and Other Nonpositional Goods.” American Economic Review, 75, March, 1985, pp. 101-116.
Bottom quintile: Absolute earnings decline
Middle quintile: Negligible earnings growth
Top quintile: Substantial growth
The top 1 percent
The top 1/10th of 1 percent…
1980: 42 x average worker’s earnings
2000: 531 x average worker’s earnings
Hedge fund manager James Simons: $1.7 billion in 2006 (38,000 x average worker’s salary)
Top 25 hedge fund managers: $14 billion in 2006
An effective interview suit
A suitable gift
2) you save too little to support a comfortable standard of living in retirement, but your children attend a school whose students score in the 50th percentile on those tests?
Median size of a newly constructed house:
1980: less than 1600 square feet
2004: more than 2100 square feet
Honda Civic: 2449 pounds
Consumption + Savings = Income
Consumption = Income – Savings
Taxable consumption = Income – Savings
– standard deduction
1989 Sunbeam, $90
Viking Professional, $5,000.