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During the Great Depression, the only two things people could seem to afford were bootleg liquor and Busby Berkley musicals, as both industries saw a rise in sales while the economy plummeted. But did the profits have anything to do with the depression?
The media have been making causal jumps between the economic downturn and the rise in luxury commodities, essentially asserting that these industries are “recession-proof“: Amazon sales are up. Consignment sales are up. Cosmetic sales are up. English coffee sales are up. McDonald’s sales are up.
Seems to make sense: during rough economic periods people seek solace in indulgent spending, a type of economic escapism.
But linking rising sales in luxury goods to economic hardship is complete bullshit.
“The whole idea of recession-proof is a bit of an oxymoron,” said Martin Evans, professor of economics at Georgetown University. “The idea behind it is that income affects price [price elasticity of demand] as everything else stays the same [certis paribus], so if everything remains equal, nothing changes [equilibrium]. This is not a sufficient explanation because everything else is not equal: consumption changes, relative prices changes, and the economy hits every individual differently.”
But, wait! McClatchy insists that, “Despite the spooky state of the economy, shoppers are still shelling out money for Halloween candy.”
What do you think, professor Evans?
“A rise in candy sales does not mean everyone is buying because the economy is bad. You might as well say that candy sales are up because there hasn’t been much rain this season.”
It’s easier to cast a simple narrative when reporting on something as complicated and jargon-filled as macroeconomics. But is the media’s over-simplification also a fabrication?
“Attributing something to a causal mechanism is almost inevitably wrong; it’s over-simplifying and presents a false representation of economic links. I’m not saying there is no casual relationship to describe, but to describe trends in terms of the whole explanation is simply misleading.”
I guess the recent rise in Russian art is just a coincidence.