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.

Essentially, if interest rates are set at zero, you don’t get any income from your savings. You either deplete the savings or keep them intact and don’t use them. Depleting the savings is actually a better strategy if there is inflation, which ZIRP is designed to induce, but either way savings become useless for any sort of long term strategy.

Likewise, stagnant wages and high unemployment gets rid of the “work long hours in a high paying job but quit in a few years and live off of the savings” strategy. These jobs are harder to get. Though even back in the day hiring managers were effective in screening out people psychologically prone to doing htis.

However the valuable parts of the book and the site focus on reducing consumption, being more satisfied with lower consumption, and thinking more strategically about money in general (for example, the point about a lower consumption strategy translating into increased spending at certain times, to get higher quality or to take advantage of bargains). This is good stuff because the way the world economy is headed we will all wind up with a lower consumption lifestyle whether we want to or not.

I see your point…

I retired early by living on MUCH less than most people do because I have no debt and I have learned to do so many things myself.

The question of where one gets even the much-reduced income I need is the hard one to answer for me, especially today with ridiculously low interest rates on savings.

ERE apparently suggests buying certain stocks and living off dividends. Instead, I buy CDs and buy food and energy from the interest income. So, I’m not technically an ERE’er, I guess.

Even my interest income is somewhat dependent on the profligacy of our society, I suppose.

I have acquired skills in making and repairing things that allow me to barter, trade, etc. with people for the few ‘extra’ things I want.

I will not ignore or deny the fact that we generally vastly over-consume simply because a reduction in the consumption rate might make my life more challenging.

Again, I fear if we don’t start slowing down the consumption, we will be FORCED to do so.

For now, though, it seems obvious the masses will NOT even begin to make a dent in the over-consumption. So, it’s sadly a moot point – for now… All you can do is hope for the best and prepare for the worst.

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.

“Currently, people who overconsume both subsidize those who wisely consume and subsidize more options for them.”

This comment seems to ignore how over-consumption is achieved. In most cases, over-consumption (by individual people and countries) goes hand in hand with debt and abuse of the resources available.

The negative, long-term effects of the massive over-consumption and debt at all levels is being felt now by everyone and is not truly a beneficial ‘subsidy’ to others. The options available to us are quickly disappearing as the world-wide economy stumbles. It’s possible those ‘options’ will almost completely disappear if people don’t start using the resources more wisely. Gym memberships seem pretty trivial if you can’t afford food.

The negative effects of over-consumption will continue to drag down economies for a VERY long time. Young people and future generations, in particular, are being screwed by over-consumption and the debt behind it.

Something akin to ERE will be forced on people if they don’t adopt it willingly now. It’s just a question of timing and degree. Many people are already there today.

Aren’t the few passionate members the same group of members who are most likely to use that rarely used stuff, and therefore be most affected by cutting it? To my knowledge, most people who use gyms infrequently don’t actually bother to figure out how to use most of the esoteric machines. They mainly use treadmills, bikes, basic free weights, and other ‘common’ machines. This is why, at least at the gyms I’ve seen, there are more treadmills than fancy machines.

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.

The question of ‘do we need gyms’ boils down to societal goals and values. If we as a society (however you define that we and that society) don’t value health and fitness, then a gym becomes superfluous. If we do value health and fitness, then a gym can act as a valuable place to act out that valuation. It is not the only one of course.

The real question, though, is not ‘do we need a gym’ because then any one person can change the answer, if they are included in your we. A better question would be ‘do I need a gym to achieve my goals?’ The more people that think about this question, the more the economics of a gym changes.

As more people accurately answer that question, the dynamics in my first post start to emerge, with the truly passionate who need a gym still supporting it, and those who don’t need it abandoning it. Currently, those who don’t need a gym but support it anyway subsidize those who do need a gym to achieve their goals.

Obviously, this is somewhat economically inefficient. However, I wouldn’t complain about people overspending on a gym if I needed a gym to achieve my goals. I would let them subsidize me because of my better understanding of what I truly ‘need’ etc. I certainly wouldn’t try to change them, especially if they don’t particularly want to change. If they did want to change, I would help them.

As Jacob points out in the original post, most people don’t want to take the question of ‘do I really need this? why?’ to it’s extreme, as he has. So what? They’re subsidizing you in what you are doing, rather it’s gyms or sailing or whatever your passion is. Why try to change them, especially if they don’t want to?

Can you say certainly that what they are doing is harming you? I’m not sure I see the logic of how they are harming you by being economically inefficient. It would seem like they are helping you, by increasing the options for how you can achieve your goals, and decreasing the costs of those things need to achieve your goals.

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.

This is a very thought-provoking issue. I never even thought of the “need” for GDP to continue increasing to prove the economy is growing as possibly being inherently bad. Basically just a way to show we’re still addicted to buying crap.

The decline of paper office work looked pretty bad if you only considered secretaries and mimeograph factories, except that the entire IT industry was growing to take its place. We got a lot of great technologies along the way — the Internet, iPods, etc. In hindsight, which would you rather have: thousands of clerical workers transcribing letters, or computers and everything based on them?

If a lot of people went ERE then, yes, a lot of capital would be redirected away from producing consumer products, health problems, and quick fixes for health problems. However that capital has to go somewhere, and it would go into new projects to satisfy the whims of ERErs. We can only imagine what that might be.

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.

Conversely, using the gym analogy, might the truly passionate build their own gym equipment and share it, whether for profit or not? After all, they now have the time to pursue gym-life beyond their wildest dreams because they’ve made themselves financially secure.

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.

The sad fact is that quality, as in the example of good boots, becomes apparent to most after the fact by realizing how rare it is. When originally purchased, did either Jacob or HSpencer know how good those boots would turn out to be relative to what the market would offer years later?

Perhaps some of the focus of an ERE workshop/e-book should be on recognizing good quality and cultivating a proper sense of discrimination.

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.