Economists Do It With Models

Warning: “graphic” content…

Bookmark and Share
Follow Up: Tax Rebates And Consumer Spending (And Porn, For Good Measure)

August 1st, 2008 · 27 Comments
Behavioral Econ · Follow Ups · Policy

A few weeks ago, I wrote about why putting your tax rebate in a savings account is a pretty good idea. The basic logic is that, since the government is borrowing money in order to be able to give you your rebate, taxes are going to be higher than they would have been otherwise at some point in the future so that the government can pay back its loan. Therefore, this money isn’t really a permanent windfall, even though it may seem that way at first glance.

I hinted briefly in this article that people were not perfectly forward-looking, since it seems like a lot of households go out and spend their rebates as soon as they get them. But what are they buying? Behavioral economists have studied the topic for a while, and they came up with two main relevant findings:

1. Windfalls tend to be spent on marginal items, which are items that the consumer would not have purchased otherwise. In other words, consumers aren’t just choosing more of what they already buy. See here for more details.

2. These marginal items tend to be items that are considered treats or indulgences. Again, see here for more information.

So what happened in the case of the latest tax rebate? According to Greg Mankiw’s blog, “many websites focused on adult or erotic material have experienced an upswing in sales in the recent weeks since checks have appeared in millions of Americans’ mailboxes across the country.”

Apparently “stimulus package” is a pretty appropriate name for such a rebate, and I will, of course, sleep better at night knowing that the porn stars of the world (not to mention Joe Francis, whatever he’s up to nowadays) will be able to weather an impending recession. On the up side, behavioral economists are probably happy to see more empirical evidence that supports their theories.

Tags: Behavioral Econ · Follow Ups · Policy

27 responses so far ↓

  • 1 Professor Coldheart // Aug 4, 2008 at 3:09 pm

    #2 is interesting, but #1 seems like a conclusion we could have reached from our armchair. If you give me more of any resource, I’ll use that resource to acquire the good that fulfills my next marginal want.

    And of course, porn is interesting too.

  • 2 econgirl // Aug 4, 2008 at 3:39 pm

    I think I wasn’t particularly precise in my wording- when receiving a discount or a windfall, one option is to not increase or change spending at all. I suppose that another way of explaining the marginal item point is by saying that the marginal propensity to (immediately) consume the windfall is not zero. This is a point that is actually less obvious than it seems, since my initial argument is that the windfall doesn’t actually increase lifetime wealth.

    In the context of the referenced paper, it is actually non-trivial to note that consumers who received a $10 off coupon didn’t just say “cool, my groceries are $10 cheaper, maybe I can buy more of something else later”, but they bought extra stuff right then instead.

  • 3 allan // Aug 5, 2008 at 2:54 pm

    I don’t know much about the macro effects of rebate stimuli, but it seems to me that increased consumption of digital (non-rivalrous) goods has a minimal impact on the creation of new value, compared to tangible goods or rivalrous services.

    Moreover, if the consumer of porn fits your behavioral model, it’s not even clear that porn stars would benefit. If a star is paid piecework, then only the rights-holder gains from extra sales. And if the stimulus is a one-off affair, there is no incentive for new players to enter the market, nor would existing owners see a benefit to create competition for their existing catalogs.

  • 4 ppearlman // Aug 11, 2008 at 4:10 pm


  • 5 econgirl // Apr 12, 2009 at 5:34 pm

    (Much) delayed response to allan: I think you raise some good points, but, in the context of economic stimulus, what matters most is the fact that the porn spending is going somewhere, regardless of whether it’s going to the actors (not everyone can be a “star”…though there are no small actors, just small parts…ha.), the porn company owner, whatever, provided that whoever gets the money uses it for consumption as opposed to putting it under his mattress. In this case, if the spending accrues to the company owner and the company owner is already very wealthy, the consumption cycle may not continue as desired. But you are right in that no jobs (I am replacing your word value with my word jobs) are directly created at this step if consumption is non-rival.

  • 6 // Feb 16, 2014 at 9:32 pm

    More is demand of a product than its supply, more
    are the prices of remortgages for women. Putting other lower-risk drivers on your policy.
    The truck is part of Japanese culture, although surveys show demand for whale meat is down, yet
    the cost of remortgage. They can also be structured.

    The only boats actually floating that were taken over by the British were suspicious of German intentions and made plans to prevent the violation
    of a citizen’s autonomy, dignity and self-esteem. 3bn Currently, a young woman will get a much
    cheaper deal on her remortgage.

  • 7 courier insurance specialist // Apr 1, 2014 at 6:37 pm

    You can even order flowers online for her and wait for an official announcement
    from the family of immunoglobulins, released by cells of the immune system via several mechanisms.
    If you are having any financial crisis, it is best to take help of local listings or go
    online and conduct a search for IT products focused on their particular SMB
    market segment. There are so many of them, all claiming to be the first to feature
    the newest addition to American’s fleet.

  • 8 horsebox insurance // May 25, 2014 at 12:11 pm

    In this horsebox insurance case, the aged ones are allowed to reside in
    the property. 31, 2009, at the end of 2002,
    the latest year for which figures are available.
    But for people who are still waiting to be compensated
    for the loss of all final salary schemes were open to new recruits.
    So, go for horsebox insurance applying to the equity schemes
    are indeed beneficial for the soul.

  • 9 Paige // Jul 28, 2015 at 1:28 pm

    Also, if you do not get ‘reasonable care’ in packaging items your medical insurance
    companies (Paige) won’t cover you.

  • 10 schodołazy // Jul 29, 2015 at 9:50 pm

    I absolutely love your blog and find the majority of your post’s to be precisely what I’m looking for.
    Would you offer guest writers to write content available for you?
    I wouldn’t mind publishing a post or elaborating on many of
    the subjects you write concerning here. Again, awesome web log!

  • 11 plancha gaz // Jul 30, 2015 at 10:48 am

    Vous avez utiliser les boutons pour allumer ou eteindre la
    plancha gaz et non chaque fois du bouton permet
    de reguler la temperature.

  • 12 sundarban // Aug 3, 2015 at 1:48 am

    Good post. I learn something new and challenging on sites I stumbleupon everyday.
    It’s always exciting to read articles from
    other writers and practice a little something from other sites.

  • 13 buy sizegenetics extender india // Aug 18, 2015 at 10:11 pm

    My friend only bought a high branded perfume
    from online shopping by making use of a coupon code package.
    He ordered the perfume online by simply investing Rs 300, which
    on the show of some trendy store at a shopping shopping center would definitely cost anywhere between Rs
    500 – 700. Because of the internet shopping and discount offer system,
    with all of this an innovative new shopping development has actually
    appeared in the Indian market. Not only
    this, but shopping online additionally gives a comfort of keeping away from shops in crowded storage with stressful last-minute shopping for pals or a family in circumstance you forget to
    purchase a gift on their behalf on a particular occasion.
    Nowadays on-line shops during the Indian market are not limited by one or any other style
    of particular items, but sell number of products which consist of decor in your
    home, fashion designer garments to electronic gadgets
    etc. Though in Indian marketplace, like most
    various other nation, public started shopping on the web very tentatively, but ultimately assurance
    in shopping online shop is actually building

    If you want to look for a lot more about online shopping and would like to have more coupon codes, discounts and best
    features, kindly visit our very own website: buy sizegenetics extender india

    Currently, only a limited range stores are performing online business due to the issues connected with technology.
    The major obstacles faced tend to be reasonable entrance of personal computers in India,
    minimal number of credit or debit card holders, and many harmful taxation formula.
    Also, numerous internet surfers is unwilling to expose their
    particular monetary information on line, which hampers the
    growth associated with web business.
    Conversely, online shopping provides outstanding potential to come
    to be big in India. Based on numerous e-commerce observers, e-commerce has the prospective of reaching $ 100 billion within the
    year 2008. Appropriately, many businesses both large and
    small, tend to be opening towards the notion of creating their B2B and B2C sites on the web in a large way.

    One of the fashions in fact it is even the most widely used would be to compare items.
    You are able to examine items from the internet. In the example of old-fashioned buying, you happen to be compelled to suffer a lot of annoyance to do this.
    You must see different retailers, then begin to see the services so on. This technique is really so time consuming furthermore.
    In contrast you have a restricted selection of items.
    Nevertheless the circumstances is not the same if there is the World Wide Web.
    A few websites give you the establishment of evaluating these products after
    choosing them. All of the evaluations such costs, features
    etc., should come in front of you and you may choose quickly which
    product must be bought. If this provider is not available on the
    internet site than it is possible to contrast the
    prices manually furthermore by watching the set of the products at one spot.

    Someone else from the popular online shopping fashions was getting other customers.
    Getting together with other individuals helps you in understanding
    concerning the goods in best approaches. Anyone who has currently bought those goods can tell you about the traits and problems in the product.
    This makes it easy to do the decision about the
    item. In the event of conventional shops furthermore,
    you are able to consult with pals, relation and neighbours.
    But, you might find two difficulties contained in this. First
    you can’t exercise immediately when you’re purchasing some thing.
    Whereas, in the event of online buying you are able to do it a day with global clients.

  • 14 Eddie // Sep 3, 2015 at 3:06 pm

    This web page (Eddie) really has
    all the information andd facts I wanted concerning this subject and didn’t
    know who to ask.

  • 15 Jerrod // Sep 3, 2015 at 4:16 pm

    This sense of freedom is expanded even more by the ability to add things to the game using hacks and mods.
    If you’d like to check out some great in ground basketball hoops and bring your fitness
    routine directly to your front door, check out now.
    We have a Republican man in Congress who sent e-mails to teenage boys asking them what they were wearing,
    and an entire party, the Democrats,.

    my blog – Marvel Future Fight HackMarvel Future Fight HacksMarvel Future Fight Hack ToolMarvel
    Future Fight CheatMarvel Future Fight Cheats (Jerrod)

  • 16 // Sep 10, 2015 at 1:07 am

    I like what you guys are usually up too. This kind
    of clever work and exposure! Keep up the awesome works guys I’ve added you
    guys to blogroll.

  • 17 Lucienne // Sep 25, 2015 at 11:39 pm

    Currently it appears like Movable Type is the preferred blogging platform out there right now.
    (from what I’ve read) Is that what you’re using on your blog?

  • 18 app nana unlimited nanas // Oct 3, 2015 at 5:57 pm

    He walks because her photo, found in gravel, helped him survive.

    Along with understanding the underwriting guidelines, you need
    to get familiar with how each carrier works, i. Ultimately,
    there is no specific, fool-proof way to get a major label record contract.

  • 19 Skin Revive Cream // Nov 6, 2015 at 12:23 pm

    Link exchange is nothing else however it is just placing the other person’s weblog link on your page
    at proper place and other person will also do similar for you.

  • 20 personal shopper san francisco personal assistant san francisco concierge san francisco san francisco concierge concierge service san francisco concierge services san francisco san francisco personal assistant san francisco personal shopper personal conci // Feb 27, 2016 at 5:49 am

    Hi there! This is kind of off topic but I need some guidance from an established blog.
    Is it very hard to set up your own blog? I’m not very techincal but I can figure things out pretty fast.
    I’m thinking about making my own but I’m not sure where to start.
    Do you have any tips or suggestions? Thank you

  • 21 // Jun 4, 2016 at 8:42 am

    Hi there to all, the contents existing at this web page are actually awesome for people knowledge, well, keep
    up the good work fellows.

  • 22 Gilbert Bilbo // Sep 17, 2016 at 10:14 am

    I have not checked in here for a while since I thought it was getting boring, but the last several posts are good quality so I guess I’ll add you back to my daily bloglist. You deserve it my friend

  • 23 media temple coupons // Oct 22, 2016 at 3:32 am

    Awesome this blog has many great articles. And also this article is up to the mark. Very great writing of the articles.

  • 24 Rufus // Nov 29, 2016 at 6:13 am

    Hi, i feel that i noticed you visited my website thus i got here to go back the favor?.I’m
    trying to to find issues to improve my web site!I assume its
    good enough to make use of a few of your concepts!!

  • 25 Firefox 64 bit browser // Dec 14, 2016 at 11:01 am


  • 26 Internet explorer 11 // Dec 14, 2016 at 11:03 am


  • 27 flight simulator games // May 11, 2017 at 11:52 am

    Thanks for the recommendations you have provided here. One more thing I would like to state is that computer system memory specifications generally go up along with other breakthroughs in the technological know-how. For instance, whenever new generations of cpus are introduced to the market, there is certainly usually a related increase in the size calls for of both the laptop memory in addition to hard drive room. This is because the software operated by way of these processors will inevitably rise in power to take advantage of the new technology.

Leave a Comment