Comment by eru 13 days ago
Wealthy people usually spend more---just because they are less price sensitive and care more about other metrics.
I'm not sure how everything 'costs less'?
You could say that wealthy people can substitute money for time. So they need to spend less eg working hours for each good consumed.
I think he's getting at the pair of boots theory.
> You can spend money to save money in the long run. Just buy the house instead of having to pay for mortgage. Invest it so that it’s generating money while you do nothing.
It's all about opportunity costs.
If the interest on your mortgage pays less than you can get in eg the stock market, you are better off not paying your mortgage. (Ignoring fees and taxes for a moment.)
Yes, that theory was never very convincing to me. I grew up on welfare and now make software developer money. I can tell you that I definitely spend more on shoes now, even if they last longer.
Yes, a rich person and a poor person could try to buy the same items and the rich person might be able to buy them cheaper. But: first, when you have more money you generally want to buy nicer stuff, and the bang-for-buck generally goes down. Nicer shoes might cost twice as much, but they are perhaps twenty percent better. (And that's worth it for well-off people!)
Second, you can save a lot of money if you are willing to invest some time. From DIY or just generally shopping around. But: rich people's time is more expensive, even if just by opportunity costs.
From the Wikipedia article:
> In June 2024, the National Bureau of Economic Research from USA published a working paper expanding on the ONS findings, showing that cheapflation, a term the authors coined, is a global phenomenon:[21] "prices of cheaper goods increased at a faster rate than those of more expensive varieties of the same product",[22] thus placing a higher financial burden on poor people.
Funny enough, this observation is perfectly compatible with the notion that everyone, including poorer people, got richer over time as the economy grew, and so the cheapest and nastiest goods were removed from the market. The cheapest most basic TV you can buy today is miles better than what you could buy in the 1970s for example.
> But: first, when you have more money you generally want to buy nicer stuff, and the bang-for-buck generally goes down.
This isn't necessarily a fact of human nature, this is just an extension of Greed.
There is an inflection point, where the price of a good is minimized whereas it's quality and lifespan is maximized. Such an inflection point is somewhat high - meaning it cannot be reached by poor people.
Sometimes people cannot be satisfied, and they will go well past the inflection point. Such behavior is, of course, completely optional and almost always self-destructive.
Sure, a Birkin might be pretty, but really any decently made leather bag will run circles around what you can find at Target. The Birkin isn't bought for quality.
> There is an inflection point, where the price of a good is minimized whereas it's quality and lifespan is maximized. Such an inflection point is somewhat high - meaning it cannot be reached by poor people.
You say that as if it's universally true of all goods.
Btw, finance is one way to transform cap-ex into op-ex. That's why we have mortgages and you can rent things.
> Sure, a Birkin might be pretty, but really any decently made leather bag will run circles around what you can find at Target. The Birkin isn't bought for quality.
That's why you don't buy a leather bag when you are poor and have your wits about you. Leather is expensive. Not just absolutely, but also per use of your bag.
I wouldn't go as far to say "everything costs less" but it is pretty well that established that poverty is very expensive.
A couple of key examples:
Food deserts often mean that groceries are more expensive in poorer areas as opposed to neighboring rich ones. Additionally, bulk food is cheaper but requires having enough funds to buy more than your immediate needs.
It is generally cheaper to own your own home than to rent and low income people are going to pay higher interest on the same home loan.
It is always cheaper for rich people to borrow money than poor people and poor people are often forced into debt in situations where rich people can dip into savings. Having to pay interest on your rainy day debt is way more expensive than getting paid interest on your rainy day savings.
That last one is huge, and tends to compound across all kinds of other areas, increasing the effective price that poor people pay for almost everything.
In the most general sense, it is often feasible to spend more money up front to save money down the road. The amount of interest poor people have to pay to do this reduces or even totally wipes out any savings.
This is all pretty well documented and studied. It's part of the unfortunate feedback cycle at the bottom of the economic bracket that makes climbing back out harder the poorer you get.