Here is a boot with a life time guarantee http://www.drmartensforlife.com/

On a personal finance discussion board, the topic of savings rate came up. If the U.S. saved 40% like China, it would be a disaster economically … or so it was claimed. And yet when I thought about it, it would only be a problem from our existing point of reference. We need 10% returns on our portfolios because we expect to constantly upgrade our gadgets and living abodes and lifestyle. If in this alternate world, we saved 40%, our minds would be adjusted to the different reality of durable goods and 0% real return could satisfy our retirement needs.

@MossySF – Increased saving would only be a disaster if the money was placed under a mattress.

In normal economic conditions, when you put your money in a bank there is a money multiplier, as your money is lent out to those who are interested in spending it.

(A portion of deposits must be kept on reserve. The funds that have been loaned out will eventually end up back in a bank and will be again loaned out, and the cycle continues.)

Essentially: multiplier = 1 / reserve requirement

Oh, and to answer the title of the post: we should all try working less and see. I suppose that reducing incomes is one way to reduce consumption. We have to break this consumerism cycle somehow. It may be painful for a bit, but it could give us hope for the future.

Jacob,I’m not sure if you just have enough money and just don’t want any more, but….

I must tell you. I absolutely love your blog and your ideas. Why not have a “Donate” button? It’d be a way to get some dollars and my way of saying “Thank you”.

Again, thanks Jacob, your blog is my favorite.

Hey, I’m patrick. I wrote the comment this article was based on.

My point was not meant to be about the GDP or level of economic activity. That would surely decline, but as Jacob pointed out, this is not necessarily a bad thing.

That would not be how I would measure objective quality of life. Maybe a more appropriate term for what I was thinking would be the options available to you. If a large enough group of people adopted the early retirement lifestyle, then the options available for what you can do in this world would decline proportionately.

Currently, people who overconsume both subsidize those who wisely consume and subsidize more options for them. The best way to demonstrate this is through an example. I think everybody can relate to a gym.

If we look at an average gym’s income statement and its usage log, we would notice something curious. There would be a minority of people who use the gym fairly regularly, and then a majority of people who hardly use it at all. But, all of them pay the same membership fee (at least, that’s how we’re going to assume our gym operates).

Now, let’s say this gym currently has 100 members.

And let’s say all of them decide to become ‘early retirees’

Maybe 30 of them used the gym regularly, and 70 didn’t.

So, in keeping with good financial advice, those 70 who don’t use the gym cancel their membership.

25 of the 30 who use it regularly decide that they can get their exercise elsewhere for cheaper. So they buy kettle balls and bikes and cancel their gym membership as well.

Now there are five members left, all of whom are passionately training for various sports like bodybuilding etc. These guys are now in a tough spot.

The same costs that used to be carried by 100 members would now have to be carried by these 5 members in order to keep the gym functioning at the same level as before.

In this example, the gym will be forced to make some changes. They could raise fees 20x to maintain their current revenue and level of service. They could cut costs (some of which will now be redundant, and some of which will actually affect the member’s quality of service). They could do a combination of these.

however, as the fees increase, the services are cut, and the quality of the gym declines, it is possible that some of the remaining members will leave.

It is highly likely that this gym is now an unsustainable business which will close.

This means that those 5 people who used the gym well now have less options. There might be another gym around if they live in a big city. If they live in a less densely populated area, they might be out of luck, or have a long travel time to get to the gym.

If there is another gym in the area, it will probably have a lower level of service. There will probably be more people using the machines, as only the frequent users will still use gyms. This means longer wait times for machines and longer workouts. This gym might have higher fees. It will probably be farther away than the old gym was. There might be fewer machines, fewer classes, more crowded classes, etc. Point is, it’ll be a worse gym than before.

What about those other 95 people? Well, their quality of life has changed as well. Perhaps it is better. Perhaps it is worse. We don’t know what they do after the gym closes, but we do know that they no longer have the option of going to that gym. Their options have shrunk too and although what effect that would have is unknown what is known is that they can no longer go to that gym.

Perhaps subjectively to them this is not a big deal, but objectively it means that they have less options, and I would argue, a lower quality of life.

The same thing would play out in most industries, as a lower consumption level would lead to lower production. Lower production would lead to consolidation. Consolidation would lead to higher prices and fewer options. This would negatively impact people who are passionately pursuing things in those fields, as they will have to invest more time, energy, and money in the pursuit of their goals than they have to now.

Now, as an individual, it could be beneficial to adopt an ‘early retirement lifestyle’. Jacob has shown that. But it is beneficial as long as society continues consuming and producing. If everybody adopted such a lifestyle, then society as a whole would be poorer for it. There would be less contribution, less consumption, less options, less opportunities, etc.

This was what I meant by a ‘lower objective quality of life.’ Now, some people might be happier. Some people might be sadder. That is ‘subjective quality of life’. But objectively, it would get harder for everybody to pursue their passions, because fewer people are subsidizing them in doing so.

@george

The same pressures would apply to food, shelter, and clothing. Higher prices, less choices, but that’s not necessarily a huge deal if you’re content with less. However, I know personally that on the healthcare front, I want the best there is, the most choices for the lowest cost. This only happens with the best economies of scale.

What more do you really need? Well, psychologists have a hierarchy of needs called ‘Maslow’s Hierarchy of needs’. I don’t want to go into it in depth here, and I think you might have heard of it before anyway. The gist of it for those who haven’t seen this before is that materially, humans only really need food, clothing, shelter, water etc. Beyond that, our needs are mostly emotional, mental and spiritual.

On a note about that, a lot of people try and satisfy those emotional, mental, and spiritual needs with material things. Part of what the ERE lifestyle entails is meeting those needs with non material things, which is both cheaper and, ideally, more effective.

Those who are truly passionate might build their own gym equipment. But their lives are harder for it. It is harder to build and maintain your own gym equipment than to go to a gym. For most people it is also not economically feasible to have the same selection of machines that they can get in an average gym. Are those machines really necessary? Well, that depends on your exercise goals and workout regimen.

That person used to only put forth 1/100th or less of the economic value/money necessary to maintain a gym. Now they must carry all that burden, or suffer a reduction in quality of gym. It makes more economic sense for that person to join some kind of collective exercise facility.

Now, if they passionately want to run a gym, well, their dreams just came true. But if they just want to work out as best they can, it might be better for them economically to work however many hours it takes for them to pay someone else to maintain the gym then for them than to do that themselves.

It is true that one action stimulates the rest of the economy. However, some where in that chain of spending..the broken window, to the person fixing it, to the bread…someone is holding some of the money..this differentiates between the rich and the poor…somewhere, someone is making a larger amount and saving a portion of it. It really is a pyramid..it’s just the people at the bottom don’t realize it.

@patrick
The problem with your gym argument is that your assumptions are wrong. You start off by assuming that we need gyms and then asking “How we can fund our gyms?” when the real question is “Do we need gyms? Why?”

The same can be said about health insurance. Mr. Obama started off with the premises that we all need health insurance and then asked congress to figure out how to fund it for everyone. However, the real question is “Do we need health insurance?”

Same questions can be extrapolated to most everything.

The gym membership example is a great example, but I think it actually works against your point Patrick.

If those 5 people trully need a gym they will find a way to get one (their own, spend the extra cash on the higher memberhsip, etc.). In turn, these people would demand better and more efficietn gyms (most gyms have tons of stuff that is rarely used, but kept around so they can say they have it). Because the cost of quality would be so high you would only purchase what you really needed.

If the same level of quality was adhered to across the entire economy the people who had “gym memberships”, but never used them, would take their cash and spend it on what they really want. In turn, what they really want would be of higher quality, but more expensive.

I generally agree with buying top-quality stuff in order to save money in the long run and to enjoy the stuff while it lasts. In practice, I’m often too stingy to actually fork out the money, but I’m getting better. Luckily, the freshest vegetables, fruit, and meat here in Sydney are also the cheapest 🙂 (found in poor suburbs where, predominantly, Asians live and actually cook and care about ingredient quality, as opposed to people in richer neighborhoods). Also, buying bulk allows you the best quality for half the cost of supermarket-quality.
Sometimes, though, bad quality is the way to go: eg., I’ve found a brand of cheap and flimsy flip-flops (Omni) that cost about $10 and wear out in a 1/2-1 year but are the most comfortable things I’ve ever worn on my feet. I plan to buy 20 or so of them, in case they stop producing them 🙂

Patrick is on to something, but I don’t think that the gym example addresses what I deem to be a bigger flaw with ERE, one which Jacob points to with his “it is generally agreed that extreme early retirement although simple in design is hard to follow” comment. I, on the other hand, don’t think quality of life (standard of living) is the bigger issue here – as that is entirely subjective. We can all adopt and change our perception about what ‘quality’ is even if our options shrink. Why has quality of life shrunk over the years as our economy and options available to us have grown?

The bigger issue to me is that the ERE possibility only exists if a small percentage of the population actually live it out. Why? It’s entirely dependent on investment income, which is dependent on economic or GDP growth.

If, say 50% of the population decided to pursue ERE and our GDP drastically shrank as a result, this would eat into the capital base that those investment returns were coming from. With less returns to live off of, one would be forced to drop ERE and go back to work (that is, of course, if doomsday panic didn’t set in first as those without capital to draw from walked around the streets like zombies looking for food).

As such, ERE is a strategy that only works if a small % of the population actually adopt it. In my opinion, being dependent on the same kind of consumer waste activity which we strive to rid ourselves from is the great and only flaw of ERE. We want people to live like us, just not everybody, b/c then we’d all have to find another way to afford our basic expenses. I’m really struggling with this.

http://www.gmo.com/websitecontent/JGLetter_ResourceLimitations2_2Q11.pdf

The way the world economy is headed, we will all need another war to rejuvinate spending and consumption of resources, at the price of hundreds of millions of lives lost.

I rather have more people on earth consuming only what they needed, working only when they had to, and living a semi-retired Mexican/Scientific fisher/fun-researcher life, then having wars between Capitalists, Kings, Communistists, and Terror-Extremists.

I see this article is older, so it may be a moot point now, but I have one word for DW, as far as boots: FRYE. They last decades … plus FRYE’s the oldest shoe-making company in the United States. Also, you can sometimes find FRYEs on sale—Amazon is one way. Some of their boots are still made in the U.S. too (I think Cavalry and Harness are; I have the former). Most of their boots have wooden heels as well.

[…] if everybody did it? See some article on this topic (btw ever heard of the broken window fallacy?). See other interesting articles such […]