Those who take decisions in the financial markets or agree to transactions by way of trading for goods have usually arrived at them after rational consideration — sometimes for prolomged period of sudy beforehand. Such decisions are often taken for those who are seeking long-range financial scecurity.
But many decisions are irrational such as when euphoria, or at least unjustified optimism, takes over, and investors are carried along dy the herd. Shares and other assets are bought at prices that are vastly over-rated, being driven by the ‘normal’ instinct of greed. Inevitably such bubbles burst at some point and then fear and panic are the driving instincts.
But there are also many financial decisions which are both rational and instinctive such as when we buy status goods. These are consumer goods which convey one’s social and financcial standing to the world at large. After the sweatshop era of the industrial revolution in England in the first half of the 19th century, working hours started to be reduced and wage packets contained a little more than necessary for survival.
Money could then be saved and then spent on goods which were either labour-saving or were visible signs of aspiration to higher social levels that were hitherto not possible. The chief of these were soundly built brick and slate housing — something not achievable by the bulk of countryside dewllers before the industrial revolution. Then there’s be more furniture than they’d have have before. At the tail end of the 19th century there was a profusion of goods, clothing and portable ornaments to suit all social levels — with an immense flworing of gold lace epaullettes and strange new iems of clothing for formal public occasions.
And then, in the 2th century as science started to unleash even more innovations we have telepnone, radio, television, cars, and holidays, all modern substitutes for the personal services which the rich and middle classes but which susnequently became chepaer with wider swathes of mass production.
However, once the personal computer — which never became the same sort of universal status good as others, such as television, had been, the supply of uniquely new status goods dried up. The only universal consumer good since the 1980s is the mobile phone. It was only a status good briefly before it became so popular and so useful to poor and rich alike that sales are spreading all round the world , far beyond the advanced countries.
Gathering the above two points — decision-making and least effort — together, what can vwe say about the modern economic system? What economig grwth sectors will be left? What abut the future of automation and will there be new incentives for cconsumers? Will the city-based nature of the indiustrial revolution and today will give way to another mode of habitation, at least initially for many in the advanced countries? I will explore this in a future posting.