Do-It-Yourself on the Rise

It’s no surprise that Americans have been cutting back in the face of job losses, pay reductions, and shrunken retirement accounts. One result has been a sharp increase in the saving rate, which has averaged more than 4.5% this year after flirting with 0% in recent years.

A second result is a rebound in doing-it-yourself.  Home-cooking has replaced some restaurant visits, for example, and more Americans are picking up a hammer rather than calling a handyman.

This morning’s Washington Post provides another example of such rising home production — a boom in vegetable gardening:

Seed producers and merchants across the United States are reporting the same phenomenon of crazy demand and even some shortages, especially of staples like beans, potatoes and lettuces. Sales of seed packets picked up last year and have grown significantly again this season, which runs from January to June.

Industry observers attribute the boost in sales to a concern for food safety following outbreaks of E. coli and salmonella poisonings and a desire by consumers to be a part of the local food movement. Michelle Obama’s new vegetable garden at the White House may also be inspiring people, they said.

But the primary reasons, they speculate, are the recession, income loss and the need for people to lower their grocery bills by growing their own. (my emphasis)

Anecdotes like this have a number of larger implications:

  • First, specific sectors of the economy may thrive during times of economic weakness.  Indeed, seed sales are up because of the recession, not despite it.
  • Second, the recession has moved the line between what’s produced at home and what’s purchased in markets. That suggests that conventional measures of the economy — e.g., gross domestic product — may overstate actual swings in production. During good times, families may “outsource” some activities to the marketplace, where they are more likely to be measured as contributing to GDP.  During bad times, families may “insource” those activities, making them less likely to show up in GDP.
  • Third, home production is an important way in which families try to adapt to economic challenges. Unemployed workers, for example, often make significant economic contributions to their household by producing goods and services that used to be purchased outside (for evidence on the importance of this effect, see a recent paper by Michael Burda and Daniel Hamermesh who find that household production increases substantially when unemployment rises).

Some readers may wonder whether these observations imply that the current economic downturn is somehow less bad than we usually hear.  I think the answer to that is a resounding no.  The economy has been as bad as we’ve heard.  But families have been able to soften some of the blow by doing more themselves.

About Donald Marron 294 Articles

Donald Marron is an economist in the Washington, DC area. He currently speaks, writes, and consults about economic, budget, and financial issues.

From 2002 to early 2009, he served in various senior positions in the White House and Congress including: * Member of the President’s Council of Economic Advisers (CEA) * Acting Director of the Congressional Budget Office (CBO) * Executive Director of Congress’s Joint Economic Committee (JEC)

Before his government service, Donald had a varied career as a professor, consultant, and entrepreneur. In the mid-1990s, he taught economics and finance at the University of Chicago Graduate School of Business. He then spent about a year-and-a-half managing large antitrust cases (e.g., Pepsi vs. Coke) at Charles River Associates in Washington, DC. After that, he took the plunge into the world of new ventures, serving as Chief Financial Officer of a health care software start-up in Austin, TX. After that fascinating experience, he started his career in public service.

Donald received his Ph.D. in Economics from the Massachusetts Institute of Technology and his B.A. in Mathematics a couple miles down the road at Harvard.

Visit: Donald Marron

Be the first to comment

Leave a Reply

Your email address will not be published.