Discretionary Spending (and my mother)

Elizabeth Nowicki —  31 August 2006

Back during GW’s first term, when various folks were positing that the economy was in a recession, my mother said something along the lines of “I know that we are not in a recession because people are still buying bras from Victoria’s Secret.” True story.

My mom’s point, for those of you who have never bought a bra at Victoria’s Secret, was that as long as people had the discretionary cash to spend $32 on a bra (ONE bra) at VS as opposed to, say, $7 for a bra from JC Penney’s, there was enough cash in the average consumer’s pocket to refute any notion that we needed to worry about a weakening economy.

It is good to see confirmation that my mother’s sophisticated economic reasoning holds up in the mainstream, however, as is evinced by today’s Starbuck’s article from Reuters. It is unclear whether the University of Chicago will come recruit my mother or whether she would be better off approaching them herself.

(My personal test of the strength of the economy hinges on whether we still have private equity markets (as long as we still have private equity, we are A-ok), but I am not quite as sophisticated as my mother.)

2 responses to Discretionary Spending (and my mother)

    Elizabeth Nowicki 8 September 2006 at 9:30 am

    This might be a bit naive, but I am assuming I am seeing an OPM point here. If people with money are willing to invest their own money in private equity, it seems to me that the economy – as a whole – is either doing o.k. or perceived as likely to hold its strength.


    I’m interested in why you think private equity is an indicator of the strength of the economy. Could you give a little more detail on that?

    I personally think we are seeing, at least in part, a flight to quality out of regulated public equity markets in response to (insert cause here). This would limit the utility of private equity as a measure of economic health. Thoughts?