Taken together, observations 2 through 6 imply that, as people get older, they buy less and less stuff. Combined with observation 1, these observations explain why countries with aging populations experience lower rates of economic growth.

6. There's no need to replace perfectly good stuff. True some stuff, like mobile phones, only lasts a year or three. But other stuff, like cast-iron frying pans, lasts for decades.

4. It's hard to get rid of stuff. Economic models typically assume disposing of unwanted things costs nothing. But life isn't like that. Sorting out stuff that can be tossed from stuff that is worth keeping takes time and effort.

3. People can only handle so much stuff. Sock drawers get full of socks. Cupboards get full of cups. Bookshelves get full of books.

This post could have been called, "Secular Stagnation and Cast-Iron Frying Pans". Secular stagnation is sometimes thought to be caused by an imbalance between savings and business investment. The economics of stuff explains secular stagnation in terms of household investment, that is, investment in consumer durables.

Buying cast-iron frying pans is a form of investment - one that pays dividends for decades in the form of excellent grilled cheese sandwiches. But I already own three cast-iron frying pans - I'm not planning on buying any more for the foreseeable future.



The economics of stuff suggests secular stagnation is due to deficient population growth, as well as population aging. It doesn't matter how many old people there are, as long as the population is growing, young people will come along who will need to buy stuff. But if there is no net population growth - or if the number of old people exceeds the number of young people - the young no longer need to buy stuff. They can get all the cast-iron frying pans (and furniture and wine glasses and vinyl LPs) they need from old people. Who are happy to get rid of it.

All of what I've written here is basically common sense, but it points to two limitations in the micro-foundations of other explanations of secular stagnation. First, because other explanations fail to take into account the limitations of people's capacity to store stuff, and people's (irrational) aversion to getting rid of stuff, they fail to predict the extent to which people's demand for new stuff falls over time. Second, they treat "consumption" as something that lasts one period and then disappears. That's wrong.

Stuff is messy and hard to deal with. But that's not an excuse for tossing it out of economic analysis.