Following the Money

August 18, 2010
Posted by Jay Livingston

Why do you have a cell phone? If you didn’t have one, what would be the cost to your work and social life? In other words, to what extent is a cell phone a necessity?

Mike Mandel, an economist, looks at what Americans have spent more money on since the onset of the recession. Here’s the table.

(Click on the table for a larger view.)

Here’s Mandel’s take on it:

Right there up at the top is America’s love affair with mobile devices, where spending has soared almost 17% since the recession started. Also supporting my thesis of a communications boom–spending on wired, wireless, and cable services have risen by 5%.

Mandel seems to think that all spending is discretionary. We spend our money on what we love. If you want to know what’s in our hearts, follow the money.

It doesn't feel that way to me. If my landlord raises my rent and I don’t move out, does Mandel think it’s because of my “love affair” with my apartment? (Note: the increased spending on housing was more than 60 times that of telephones. )

Yes, cell phones show the largest percentage increase. But in actual dollars, that increase is pocket change compared to the increase in spending on healthcare including drugs. The phone increase was $1.5 billion. The increase in healthcare was more than 100 times that. Does this huge increase reflect “America’s love affair” with doctors and prescription meds?

Are the cellphone and wi-fi a whimsical purchase, like new pair of shoes when you already have more shoes than you can fit in the closet? Or are they like a car, almost indispensable for finding and keeping a job?

Here’s the other table – items Americans spent less on.

In some cases, the changes are caused by individual choices. But for many of the items in these tables, if you asked people why they changed their spending, they would probably see themselves as not having had much choice. My rent went up, the price of gasoline went down.