Why do people spend more than they can afford?

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“Income inequality forces people of lower or middle income to spend more than they can afford on housing, clothing, and sometimes even food — “

In 2007, UC Press published a book by Robert H. Frank that challenged the conventional wisdom about the causes and effects of income inequality in the United States. Now UC Press has reissued Falling Behind: How Rising Inequality Harms the Middle Class with a new preface by the author. Book reviewer Mal Warwick gives it four out of five stars:

The subject of income inequality took center stage in the public mind only in 2010 with the advent of Occupy Wall Street, but the widening gap between the top 1% and the rest of us had been the subject of fierce debate in economic circles for many years previously.

Robert H. Frank made a notable — and eminently readable — contribution to the public discussion with his widely read 1995 book, co-authored with Philip J. Cook, The Winner-Take-All Society. A decade later, Frank delivered the Aaron Wildavsky Lecture at UC Berkeley’s Goldman School of Public Policy on the same broad topic. Frank expanded the lecture into a book under the title Falling Behind in 2007, published by UC Berkeley Press. Last year the Press reissued the book with a new preface by the author.


In Falling Behind, Frank goes far beyond the superficial coverage of income inequality in much of the media, which is largely limited to dramatizing just how far and fast the gap has grown between the haves and have-nots. That’s old hat now (though it wasn’t in 2007).

Making use of homey thought experiments and references to behavioral psychology, Frank explains how income inequality forces people of lower or middle income to spend more than they can afford on housing, clothing, and sometimes even food — and how the policies that foster inequality worsen the “tragedy of the commons,” saddling society with inadequate public transportation, polluted air and water, crumbling infrastructure, and other frequently neglected problems.

Frank challenges conventional economic thought by introducing such concepts as “the rising cost of adequate,” “expenditure cascades” (tantamount to an arms race between the economic classes), “relative deprivation,” and “positional” versus “nonpositional” goods (broadly speaking, personal consumption as opposed to socially desirable goods). The discussion is eye-opening and well worth the few hours needed to read this short but powerful book.

Continue reading the review here on Mal Warwick’s “Blog on Books.”

Read other recommendations and reviews by Mal Warwick published on Berkeleyside.


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