The bling-poverty connection - a quick follow-up

I was thinking about my last post, and about the "bling-poverty connection." Like I said before, it's usually very hard for economists to predict people's consumption behavior. One reason is because people want a lot of different things, and what they want changes over time. But another reason is that people's expectations about the future are also very important. Expectations are hard to predict, hard to measure, and they can change very suddenly and dramatically.

In the case of the bling-poverty connection, my hunch is that the authors of that paper are looking in the wrong place - it's not about what people wan, it's about what they expect to get. Black people have been economically and socially disadvantaged for so long, why should they expect that to suddenly change? If black people believe there has been some kind of fundamental change in their economic opportunity set, something tells me they would save more, bling less, and think about the future.

But real change in race relations comes gradually, not abruptly, as generations pass and slowly lose their racism. The U.S. no longer has any overtly racist laws, but white racism against blacks is still fairly widespread; it takes a long time for the "stateways" to filter through to the "folkways." And even once white racism recedes, black people don't instantly realize it's gone - there's no big TV announcement or parade to announce that black people now can have a much brighter future. That's why, as commenter Jollygreen suggests, it really might be hugely important to elect a black president. That symbolism might be the sign black people have been looking for - that the invisible chains really have come off, and it's time to save and invest so the next generation can be rich.

(Note: I've often said that an Obama presidency wouldn't have enough symbolic power to get rid of our problems with the Muslim world. But the African-American community is a different matter entirely; I think Obama's election would in fact have a profound effect in giving black people hope.)

As for the case of Mexican immigrants, though the bling-poverty connection remains a puzzle. In their case, something really has changed in their life - they immigrated to America - and that means it's obvious that hard work and saving will improve their circumstances and their children's. And in fact, Mexican immigrants are famous for being some of the hardest workers in the nation. So why don't they save more of the money they earn? Hispanic incomes in the U.S. rise from generation to generation, but if Hispanics saved more the convergence would be faster.

There's still a lot of work to be done in figuring out how to get people to save their money.