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RE: The Absolute Income Hypothesis in Economics
Think about the great depression era poor people.
When coming out of the depression, they saved every penny.
About this time they introduced plastic containers for selling stuff in.
And the people would save these containers, and so spending on containers went down.
These people had to be propagandized into throwing the plastic containers away.
AIH has more to do with the rise of marketing firms and planned obsolescence. This theory is just to cover over the real crime.
Alright😅 Let's have an in-depth explanation regarding this. First of all, what does AIH actually says? It suggests that a person's consumption patterns are based on their current level of income rather than their relative income or wealth. So it can be said when an individual's income increases their consumption will also increase but at a decreasing rate.
As you said, the rise of marketing firms and planned obsolescence is not directly related to AIH but rather relevant. It is possible that marketing firms use AIH to develop marketing strategies that target consumers based on their income levels. For example, a luxury car brand might target high-income consumers with advertising that emphasizes the exclusivity and prestige associated with owning a luxury vehicle.
Similarly, planned obsolescence is a marketing strategy used by manufacturers to encourage consumers to replace their products more frequently. This can lead to increased consumption and sales for the manufacturer.
The AIH might suggest that as consumers' incomes rise, they are more likely to replace products more frequently, as they can afford to do so. But it's worth noting that planned obsolescence is not solely driven by the AIH, some other factors such as technological advancements and changing consumer preferences, also contribute to the phenomenon.
So, we can say the AIH is not directly related to the rise of marketing firms and planned obsolescence. It's possible that these phenomena are influenced by consumers' income levels, which is a crucial component of the AIH.