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People can put up their belongings, from power drills to cars, onto internet sites for others to borrow at a price depending on the amount of time borrowed.
If enough people are participating in this, doesn't that mean that the demand for new goods will fall? Won't this have a negative effect on our economy?
Wednesday, November 30, 2011
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14 comments:
This new trend of people being too careful and frugal with their money definitely is having a negative effect on our economy. If the demand for new goods falls, then the producers will lower supply and lay-off workers that are no longer needed. This will create a negative spiral of people penny pinching, producers down sizing, people losing jobs, then back to step one and repeat.
I think that there could also be an upside to this new trading and borrowing system. By charging someone to borrow their car, people essentially are getting more money in their pockets. With this newly acquired money, people can spend it on paying bills or just buying other things from the market which would be beneficial to the economy. Say someone knew that they were going to participate in this type of program, they could buy a new car and just put it up to borrow and all the money that they receive can be used to pay off that car. Also, they will most likely make a profit from this action. So yes, it can be argued that this borrow/lend program is bad for the economy, but at the same time, it can be seen as beneficial. Also, if someone were to be in a situation where he or she could not afford to drive anymore because of soaring gas prices and because of his or her expensive mortgage, then this program could also be seen as a good thing because the person is getting money for something that he or she is already planning on doing, not driving the car, and he or she, at the same time, will also be able to pay off his or her mortgage with the incoming money. In essence and as radical as it sounds, these programs could decrease the amount of foreclosures because people will now have money to pay off their mortgages or any other bills that they need to pay off.
There are always people who are more willing to buy the product than to have to rent a simple drill by the hour. People buy what they need for themselves, to own. Almost everyone would rather own it than to borrow it, because it is more economically viable to own the product if you need it in the long term. Rental is usually for short term ownership, and if you rent a product more frequently, you are more likely to outright buy it anyways. Rental economy has always been around. What difference are these small startup websites located in the most liberal city in California going to make?
Regardless, sites like these would actually stimulate the economy more, because money is being moved around. But the demand for new goods would never go away. Because, how many things do you still have that you "borrowed" from your friends a long time ago?
Eventually this system of having people borrow goods from one another will be mucked up some how. I think companies that own the products that are being borrowed around the internet will begin to get greedy and demand that those committing the borrowing to stop. If this becomes wide scale enough, companies will start to complain that they are losing out on money.
This does put more money into the pockets of the consumers, increasing consumer spending power. This seems healthy for the economy as with higher spending power, consumers tend to demand more goods. However this does impact the supply side of the economy in the sense that there's less money being put into the pockets of the producers, forcing them to produce less. Yet this is all just our capitalistic economy at work. Demand of products is determined by the buyers, so while money is being lost for the producer, the consumers will spend the extra money they're getting into other products. Overall I would say this would have a positive effect on our economy
As has been established in class, we live in a very consumerist society. Everybody wants to live the extravagant lifestyles that they see on tv and in magazines, despite the rough economy. This borrowing and renting trend is just a more frugal and practical way to achieve this. For example, there are tons of fashion websites that allow you to rent expensive jewelry, handbags, and dresses at a fraction of the purchasing price.
I think that if the choice is between renting or purchasing something you can't afford, the more economically healthy option is to rent. It would have a far more negative effect on the economy if people were going into debt or just not spending at all.
While I don't think that borrowing websites will become large enough to affect demand on a macroeconomic scale, it could be indicative of an overall trend towards consumers looking for ways to cut spending, thus reducing demand. However, as has been pointed out, it's not necessarily indicative of a reduction in overall spending, but more of a rearrangement of spending allocation. I agree with Simone about renting being an economically healthy option--it's better (economically) to find a reasonable and sustainable alternative to original purchasing than to not purchase altogether or purchase in a way beyond ones means.
I do not believe that this new "trend" as some may call it is going to affect the economy because people will want their own products and those items will break, so they will need to be replaced. Although it could be beneficial to use the resources that are around you, I don't think many people are going to change the way they buy. As past commenter’s have said, if anything it will put some money into people’s pockets so they can go buy new items.
I don't think this will have any kind of effect on the economy. Economic patterns are always shifting and producers and consumers adapt to such changes. This simply provides a way for consumers to save money, and make money in the short term. The same way our economy has adapted to any other social trend, it will adapt to this small change. As mentioned in previous comments, there is always a portion of the economy that prefers purchased goods to borrowed goods. Also, just to point out the obvious, products that are borrowed still break and need to be fixed, or replaced, and are purchased in the first place. So in a way, these websites simply create a middle man. If a lender sees the market for borrowing a certain product, they will purchase that product and lend it out to make a profit. This aspect of the site balances any negative effects such a website may cause. Because of these reasons, I highly doubt this phenomenon will cause any serious damage to our economy
While I see how this trend of borrowing can be bad for producers, couldn't it also benefit them? Perhaps this new trend can be seen as a method of sampling, allowing consumers to try out a product and making them realize that they want one for themselves. And as Brynn and Kathryn mentioned, products do not last forever and need to be fixed, so producers can still make money. Further more, perhaps businesses can take advantage of this borrowing trend by producing products specifically meant to be lent out to consumers, thus still earning money.
I agree with Ari in that this idea of sharing goods is an effective way for people to test the product before deciding to buy one for themselves. In response to the questions at the end, this idea may not necessarily lead to a decrease in the demand for new goods; there might be an increase because people know what they are buying, and will not hesitate to buy a new good for themselves. Although as Kenny says, this may have a detrimental effect of decreasing the number of jobs, should the demand for new goods go down. If it goes up, then perhaps more job openings might open to deal with the increase in demand.
I was interested in how exactly taxing works when it comes to sharing, and I found that the NY Times did an article(http://wheels.blogs.nytimes.com/2011/06/08/taxes-on-car-sharing-outpace-sales-tax-rates-study-finds/) about how, at least for car sharing, the taxes for participating can go up to 30 percent. Despite the outrage that some people quoted in the article expressed with these high rental taxes, car sharing is more popular than ever. Maybe big taxes on rentals could be a way for the government to raise money, since people seem to be more willing to pay high taxes when they feel like they're already getting a good deal. However, there is the argument that doing this would seem like a punishment for sharing and not having enough money to buy everything you use.
Although this new program could pose a threat to larger industries, I do not believe that it will ultimately harm our economy. The borrowing of cars could affect the car businesses, but I don’t think that it will be that severe because the borrowing of cars mostly takes place in large cities where it is almost pointless to have a car. My cousin lives in San Francisco and whether she is going to school or work, she takes the bus to get everywhere. In larger cities, it can be a hassle to worry about finding a place to park and paying for parking, so in these situations, the car borrowing will be more helpful for those who don’t have a car and just need it to transport materials or go away for the weekend. In the suburbs and more rural areas, I do not believe this will change the buying of cars because there is more of a need for a car to get around. However, in both situations I believe that the renting of things from lawn mowers to chickens will be more useful universally. And there was a past comment on a similar issue that also mentioned that this renting does put money into the pockets of the people renting out their items, allowing them to have more money in their pockets to possibly spend. And if anything, these renting sites will help the environment and could help people meet their neighbors in their communities.
I feel like this would have more pros than cons because people who are on a really tight budget can now get a hold of items they need for a far much less price than what is offered by huge corporations. That in turn would also create another competitor for the large corporations, and hopefully have competing prices which will lower them. But I don't think this will make the demand for newer goods lower, because there are people who always want the newest and best items, and there are people who just want to get the job done and don't really care what the item looks like to do it.
I would like to suggest that borrowing certain items may actually simulate the economy more. Borrowlenses.com is a business that rents out lenses. By buying one lens from a manufacturer and renting it out hundreds of times at a lower price, Borrowlenses.com generates much more money from the lens than its original selling price. Now, one could argue that people not renting will have bought the lens instead. However, many people that cannot afford the lens as a one time payment or do not need the lens regularly can rent the lens instead - which if you look at the relative prices between renting and purchasing - would significantly add to the revenue gained. Also most people that need a lens on a regular basis would buy it instead because renting over 10 times would generally mean that you will be at least 1/2 way to purchasing the item. Thus, renting certain items out could actually increase GDP and positively affect the economy.
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