Poor people in the U.S. have higher absolute standards of living than Americans of past generations
and more per capita wealth than many people in Third World countries. So why do poor people feel so poor in America ?
There is the wealth effect. In first stage, when people have recently become wealthy, but still
have memories of economic insecurity, they are too worried about day-to-day survival to think much about self-expression,
personal growth, or self gratification. In second stage, as they are able to take prosperity for granted, they become more
self-indulgent, an attitude that manifests intself in a lesser willingness to take risks. In final stage, as people grow older,
they find that they can't necessarily take affluence for granted and realize they need to think about the long term.
Competition for status and the recognition of status are also important factors in economic
life. The satisfaction of "preferences" through the acquisition of material goods is motivated by the desire for one's standing
relative to other people in a social hierarchy. People judge themselves to be happier the richer they are in relation to other
people. Happiness is not linked to absolute, but relative income, and the satisfaction that money brings is related to the
degree that the rich can "glory" in their riches.
Once humans seek status rather than ordinary goods, they become engaged in a zero-sum rather
than a positive-sum game. That is, high status is achievable only at the expense of someone else. In zero-sum competitions,
many of the traditional remedies of neoclassical economics like unregulated market competition no longer work.
People live longer, and as they age they work less and play more. Products also get older,
and as they get older, they lose value. In the economy, prices are based on a balance of cost to produce and demand. As manufacture
of products is automated, costs are reduced. As more people are older, demand for most products are reduced.
In information technology, products have highest cost in ealy stages of development and usage
of products. Costs quickly decline once products are in widespread use. Prices of products fall quickly.
In automobiles, products have highest prices following production. Prices of products fall
annually.
In housing, prices are relatively stable through life of products, with changes in price based
on demand.
In food and energy, prices of products are primarily based on costs of production, as demand
is relatively stable.
In Services, prices are heavily influenced by demand.
In next ten years, people will be working less as information technology automates majority
of jobs.
Costs of information technology will be steeply reduced, thus lower the costs of most products
and services.
Costs of automobiles will be reduced as production is automated and information technology
keeps supply and demand in balance.
Prices of housing will be based on quality of life and costs of maintenance.
Prices of food and energy will be reduced as higher quality of products reduces demand.
Prices of services will be based on consumers' ability to pay. Supply of service workers will
be reduced as population ages, while demand increases as older population require help in daily living.
