Expensive Shoes, Good News

August 4, 2011
Posted by Jay Livingston

The Times this morning has a reassuring front-page story – the rich are spending, and prices don’t seem to matter all that much.

“If a designer shoe goes up from $800 to $860, who notices?” said Arnold Aronson, managing director of retail strategies at the consulting firm Kurt Salmon, and the former chairman and chief executive of Saks.

For the record, the negligible increase from $800 to $860 (a 7% increase) is actually larger than the 5% income tax increase Obama proposed on incomes over $250,000 (from 37% to 39%). This 5% increase would have wrought such disaster that Republicans, in the words of one of their leaders,* held the economy hostage to ensure that it would not happen.

Nordstrom has a waiting list for a Chanel sequined tweed coat with a $9,010 price. Neiman Marcus has sold out in almost every size of Christian Louboutin “Bianca” platform pumps, at $775 a pair. Mercedes-Benz said it sold more cars last month in the United States than it had in any July in five years.

Here’s why we should all be cheered up by the good fortune of those with large fortunes.

“This group is key because the top 5 percent of income earners accounts for about one-third of spending, and the top 20 percent accounts for close to 60 percent of spending,” said Mark Zandi, chief economist of Moody's Analytics. “That was key to why we suffered such a bad recession - their spending fell very sharply.”

You might think that the rich account for more spending because they have the bucks. The top 5% that accounts for one-third of spending also accounts for about one-third of income. Now Mark Zandi is a very smart economist, so I’m sure there’s some reason that it’s better for the economy when rich people buy luxury German cars than when the other 95% of us buy the things we buy.

So it’s good that the money is flowing to the top. It’s certainly not flowing to the rest of us.

The success luxury retailers are having in selling $250 Ermenegildo Zegna ties and $2,800 David Yurman pavé rings - the kind encircled with small precious stones - stands in stark contrast to the retailers who cater to more average Americans. [emphasis added]

How about shoes? One of these shoes is the Nieman Marcus $750 Louboutin Bianca mentioned above. The other is a Viviana by Mossimo, available at Target for $29.99

(Click on the image for a view large enough that you can read the writing inside the shoe
and see which one costs 30 times more than the other -- as if you really had to look.)

Apparently, it’s better for one rich woman to buy the Bianca than for twenty-five women of average income to buy the Viviana. But I’m not sure why.

*GOP Senate leader quoted in WaPo: “I think some of our members may have thought the default issue was a hostage you might take a chance at shooting,” [McConnell] said. “Most of us didn’t think that. What we did learn is this — it’s a hostage that’s worth ransoming.”

Open-minded or Just Outnumbered?

August 3, 2011
Posted by Jay Livingston

Tyler Cowen links to a Financial Times article about Match.com and gives the money quote, which quotes the Match.com engineer:

“Conservatives are far more open to reaching out to someone with a different point of view than a liberal is.” That is, when it comes to looking for love, conservatives are more open-minded than liberals.

The article provides no data or details, but I wonder whether the Match brains take into account the numbers of liberals and conservatives in the pool. If conservatives are in the minority, it may be simple math that makes them appear more open minded. If they remain closed-minded, compared to their liberal counterparts, they will have less chance of success.

In addition, if the liberal-conservative ratio is way out of balance, even a random matching will make the conservatives seem more open minded. By analogy, suppose that a population is 90% orange and 10% purple. No matter how many orange-purple matches occur, the rate of linking up with someone of a different color will be much higher for the purples. Unless all matches are same-color, the purple minority will seem more “open-minded.”

The Match.com president herself says something that supports this idea that those with fewer kindred spirits wind up becoming more open-minded.

I might come in and say I’m looking for a nice Catholic guy between 30 and 40 who is non-married. But after weeks of looking at people, I might get an e-mail from a guy who has kids, and I might accept that.

Going to Extremes

August 1, 2011
Posted by Jay Livingston

In a recent post (here), I referred to George Packer’s short essay on the current standoff in Washington. Packer used Max Weber’s distinction between an “ethic of responsibility” and an “ethic of ultimate ends.” Or, in Packer’s words, “between those who act from a sense of practical consequence and those who act from higher conviction, regardless of consequences.”

Packer said that the Republicans came down on the side of ultimate ends and that they were now extreme in their emphasis on principles regardless of consequences.

A commenter objected to Packer’s choice of words and dismissed his take on conservatives as “caricature.” . But a recent Economist/YouGov poll (here, July 23) suggests that although Packer’s diction may have been undiplomatic, he was essentially correct about the difference between the Republicans and others, a difference that holds not just in Washington but in the electorate generally.

The poll asked.

If you had to choose, would you rather have a congressperson who...

• Compromises to get things done
• Sticks to his or her principles no matter what

Here are the results.

(Click on the graph for a larger view.)

No other variables produced such large differences. Region, sex, age, and education yielded differences of at most a few percentage points. There was an 11-point gap between blacks and whites, High income respondents ($100K and up) were 17 points more likely to want compromise than were those with incomes less than $40K. These differences are dwarfed by the 36-point gap between Democrats and Republicans and the 45-point gap between Liberals and Conservatives. It’s also worth noting that the Independent/Moderates were much closer to the those on their left than to those on their right.

Readers of a certain age or readers of history may remember Barry Goldwater, GOP candidate for president in 1964, and his defense of principled “extremism.” Despite the reverence for Reagan that Republicans often proclaim, it’s Goldwater who may be their true guiding star.

Living in the Past/Future

July 30, 2011
Posted by Jay Livingston

Last night, I saw Woody Allen’s “Midnight in Paris.” This morning I read Gabriel Rossman’s cold critique of an ABC poll that Robin Hanson recently discussed. It was about cryonics. Not so different, really.

Nostalgia is a longing for the past. From that feeling grows a set of ideas and beliefs – that the past was better than the present, more comfortable and comforting. Cryonics feels the same way, but about the future. We are frozen in the present and thawed in some warm, ideal future. (Is there’s a word for this future-nostalgia?)

“Midnight in Paris” is all about nostalgia. It is nostalgia. The main character Gil (Woody Allen in Owen Wilson’s body) is a writer on vacation in Paris with his fiancee. At the stroke of midnight, he is magically transported back to Paris in the 20s. He hangs out with Hemingway and the Fitzgeralds, Gertrude Stein reads a draft of Gil’s novel-in-progress, he wins the heart of a beauty who has been posing for (and sleeping with) Picasso.

The scenes of Paris of the present are filmed in the very harsh light of day. Paris of the past is Paris at night, dark with romantic lighting. That’s where we want to be.

(Click on the image for a larger view.)

Cryonics plays on the same idea, but it reverses the time line and replaces romanticism with science. The fantasy is the same – being transported to a much better world – but that world is in the future. There’s a group version of this fantasy – the dream of society setting up shop on some other planet or space station, starting a whole new civilization free from the frustrations of the world we actually live in.

In the end, “Midnight in Paris” suggests that the nostalgia it has been promoting is not only futile but false and impossible even on its own terms. The beautiful model, who lives in the 20s feels nostalgic about the Belle Epoque, and when she manages to travel back to that period – Toulouse, Gauguin, Degas – she find those artists to be nostalgic for the Renaissance.

Come to think of it, Woody Allen gave us a critique of the future-nostalgia fantasy as well – “Sleeper.”