In an economy that grows year-on-year, for centuries, the
total amount of possessions will grow too. There is however a physical limit to
what our houses can contain, so either
we stop buying and start saving, or we throw away faster, or we miniaturize our
possessions. The miniaturization then is especially the investment per cubic meter, so we can hoard more
cumulative income in the limited space of a house. An iPod takes up less space
than a CD-collection, which is again smaller than the same amount of music in
vinyl. An Xbox is smaller than a baseball, an e-reader is smaller than a book
case, a flat screen takes up less space than a classical TV-set and 100 euros
worth of jewelry in gold is smaller than 100 euros worth in silver. But at some
point the house is full and we have to throw things away if we want to buy new
stuff. Despite the miniaturization and throwing away, the result over the
centuries is that the amount of possessions increases. Let’s call this the
Hoarding Trend.
There is a big destabilizing effect of this amassment of goods:
people have so many possessions that buying many types of new goods is for a
large part discretionary. When a crisis hits, people may decide to postpone buying new things. The notorious Men’s Underwear Index describes
this phenomenon, but it also applies to many other material goods. Some
collections of material goods (“fleets” in Flostock terminology) will age fast and at some time will need replenishment, whether
the crisis is over or not, either because of wear or because of fashion (which
could also be seen as a kind of wear).
This applies to cars, underwear, clothing in general and maybe it
applies to music as well. But it does not apply so much to furniture, home
decorations, books, kitchen utensils, sporting equipment or gardening. For
those categories of fleets of material goods fashion is not changing so fast
and a little aging is not directly visible (at least not for a middle-aged guy
like me J).
So in these categories people can postpone the rejuvenation of their hoard,
their fleet of possessions over a longer period.
So what is the point? Point is these material possessions
are a stock that in a crisis may undergo aging without changing in size, but
with a big change in flow. Example: Suppose the maximum life of a couch was 10
years before the crisis, so the fleet of couches had an average age of 5 years.
In the crisis people decide to wait longer with buying a new sofa and thus to
let it age to e.g. an average of 6 years. In that case the furniture retailers
see a 17% drop in sales. Underwear sales
dropped in the crisis, but you cannot postpone buying new shorts longer than a
couple of years, so sales must have recovered by now. So a crisis drives delays
in buying for stocks of possessions, which delays worsen the crisis. For goods
with a potential long life the effects are biggest.
After the crisis, when consumer confidence returns, people
want to go back to the average age of their hoard and buy a bit more for a
while, creating an upturn in the economy and creating a new, young fleet of
stuff, ready to be aged again in the next crisis. This we can call the Hoarding
Cycle. The Hoarding Cycle waves around the Hoarding Trend. Question is whether
the Hoarding Cycle is driven by the long term economic cycle or the other way
around. And since the discretionary part of the possessions is getting bigger
over time as the Hoarding Trend curve goes up, the amplitude of the Hoarding
Cycle might be growing as well, predicting bigger crises in the future.
