The problem with Vimes' boot theory of economics

A FB friend posted this:

Transcript:

No economist will ever come up with a better description of why being poor is so expensive Than Terry Pratchett. Such a great quote.

Take boots for example. He earned thirty·eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh·Morpork on a foggy night by the feel of the cobbles.

But the thing was that good boots lasted for yeas and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while a poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet. 

This was the Captain Samuel Vimes 'Boots' theory of socio-economic unfairness.
**

It may be a great quote for those who believe that the poor are being oppressed, but as far as being logical, well, we find the example unconvincing.


First, the story assumes that certain variables are unchanging over Vimes' lifetime, like his income, occupation, the cost of boots, and the length of time boots last. None of these assumptions are valid.

The trend in the US is that people are moving up in economic class:

…the higher income classes expanded significantly during the first period. Between 1967 and 1981, the upper middle class tripled in size (from 6% to 18%) and the MMC grew by 3 percentage points (from 47% to 50%). Offsetting these gains were a corresponding shrinkage of the lower middle class (LMC) from 31% to 20% and the poor/near-poor (PNP) from 16% to 11%.

Historical changes in the size of various classes looks like this:

In constant dollars, those who have a household income of less than $50,000 has shrunk, while the upper middle class has grown. More and more people are moving out of poverty and into better life situations. This means Vimes likely does not stay at thirty-eight dollars a month.

In addition, the cost of certain goods has been declining relative to income, like cell phones, computers, food, and travel. Most of the things that are increasing relative to income are heavily regulated or influenced by government, like health insurance, college, automobiles, and housing. Government policy also influences buying power by causing inflation via the national debt and manipulating the money supply.

Second, the thesis of the story, that being poor is expensive, is false. The poor in the US, by world standards, are pretty well off. The problem comes from not living within one's means, and is exacerbated by government subsidies to the poor. Thus there is no incentive to work if one's income is provided by government, which means there is also no incentive to get a better job or a job at all, or maybe relocate to an area with a better job market.

In addition, there is an increasing tendency to make purchases with credit, which has the effect of driving up the cost of those things. If the affordability of a purchase is based on the monthly payment and not the actual cost of the purchase, then the actual price tag of the purchase is no longer relevant.

A new vehicle purchase is a good example. The sticker price of a new truck can be $70,000, which would make the average person turn pale. But borrowing the purchase price means one can exchange the daunting purchase price with a lower monthly payment. The $70,000 truck is now a $921/mo. truck (7 years at 2.9% interest.) If that's too much, then do a 10 year loan: $673/mo. As long as the payment fits the budget, then the actual price of the item doesn't matter.

This is a horrible way to run one's financial life.

Third,  Those who interpret the story assume that poor people are incapable of doing what is necessary to acquire more expensive things. That would be:

• Finding a better job
• Saving for the future
• Cutting back on elective expenses
• Setting one's sights lower
• Reducing the need for immediate gratification
• Combining finances with another in order to share the purchase

Fourth, Vimes made his spending choices, as well as his other life choices. Those choices are his own, and no one else is to blame. There is no unfairness.