NCPA - National Center for Policy Analysis


September 9, 2004

As incomes go up, Americans spend a greater proportion on intangibles and relatively less on goods. One result is more new jobs in hotels, health clubs and hospitals, and fewer in factories, says author Virginia Postrel.

In 1959, Americans spent about 40 percent of their incomes on services, compared with 58 percent in 2000. That figure understates the trend, because in many cases goods and services come bundled together.

Consider food, classified by the government's spending survey as a "nondurable good."

  • In 1959, consumers spent 25 percent of their income on food, compared with 14 percent in 2000; today food spending looks much smaller if you exclude restaurant meals.
  • Meals at home took 19 percent of income in 1959, compared with only 8 percent in 2000.
  • Another way to look at the same trend: In 2000, we spent 41 cents of each food dollar on restaurant meals, up from only 29 cents as recently as 1987.

Restaurant meals have changed, too. More and more of their value comes not from the nutrition and dishwashing services - function - but from the experience the restaurant provides. We don't go out to eat just to avoid cooking. We go to enjoy different cuisines in pleasant environments, explains Postrel.

For successful restaurants, aesthetics is no longer an afterthought. Customers are paying for memories, not just fuel. What's true for restaurants is true across the economy. New economic value increasingly comes from experiences, says Postrel.

Americans have not stopped buying stuff, of course. (Indeed, there's a whole industry devoted to organizing our pantry-like closets.) But the marginal value of tangibles versus intangibles has shifted. That many manufactured goods are also getting cheaper only intensifies the trend, says Postrel.

Source: Virginia Postrel, "The New Trend in Spending,' New York Times, September 9, 2004.

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