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01 March 2009

Vanishing Diseconomies

TO recently had occasion to make a targeted venture to a shopping mall, in order to obtain a specific item. While not one of TO's regular recreational activities, such a visit offered an opportunity to sample the state of retail affairs. At lunchtime on a workday, the complex was notably quiet. It seemed that many stores, and perhaps even some of the shorter corridors, were empty except for staff hoping that customers might enter. At least one store's contents were being packed up, its decorative merchandise apparently having failed to elicit sufficient sales in the face of current economic circumstances and perceptions. In the Madoff scandal, it appears that participants were misled into investing in purported assets that didn't actually exist and hence lacked underlying value; in retrospect, this has generally been considered to be bad. Loan revaluations have disrupted financial institutions and systems. In a consumer-driven economy, participants have sometimes been encouraged and motivated to buy as an end in itself, or to obtain some form of perceived status, independent of the value that the goods confer after purchase. It seems likely that at least some items would fail a "after I buy this item, will my overall satisfaction increase?" test if applied, and that more consumers are applying such a test by choice or necessity in the current recession than had been the case before. To the extent that an economy embodies investments and purchases whose worth may not withstand critical assessment, does it necessarily become unsustainable? Can stability and economic progress be achieved in a post-trinket society, or must we hope that this situation is temporary?

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