BANKS FOR THE MEMORIES. WATSON,

economists tend to think people should spread out their consumption of goods and services as evenly as possible. That’s a standard tenet of “consumption theory.” We economists sound like a fun group, don’t we, with our consumption theory, game theory and growth theory? Physicists get to smash particles together but we do games, growth and consumption.

“Spread your consumption out” is the implication of a theory but it’s also common sense. If you binge, the last little bit you consume probably doesn’t benefit you much. On the other hand, if you abstain, your first little bit of consumption probably gives you too much benefit. The way you maximize your overall benefit is to avoid feast or famine, spread it all out and even up your daily benefits.

That suggests your consumption shouldn’t be a slave to your income. If you have a bad year, income-wise, you don’t want to tighten your belt so severely it hurts, while if you have a really good year, you don’t want to go out and blow it all. In fact, if capital markets work well, you can borrow in bad times and lend in good and keep your consumption path pretty smooth.

So it bothers theorists that studies suggest income and consumption are more highly correlated than they “should” be.

Three economists — rong hai of the university of Miami and dirk Krueger and Andrew Postlewaite of the university of Pennsylvania — have a new paper out that focuses on how the consumption of “memorable goods” might help explain this greater-than-predicted non-smoothness of consumption. Their way of thinking might also say something about how strong the post-covid recovery will be.

Memorable goods are a little like “consumer durables.” If you buy a refrigerator, that involves a big one-time “consumption expenditure” but you actually consume the services the refrigerator provides one day at a time as it continues to keep your food (and contraband) cool for its functioning life, which you hope is years, maybe even decades.

Likewise memorable goods. you buy them at a given time but then the memory lingers on, giving you benefits for as long as the memory lasts. Among memorable goods, the economists include: trips and vacations (which account for 2.29 per cent of total consumer outlays in the u.s. data set they’re using), entertainment (3.83 per cent), food and alcohol consumed outside the home (4.82 per cent) and photographic services and rental (0.25 per cent). “Snapshots help your heart remember” was an early Kodak slogan. (Kodak sold “film.” you put the film in a “camera,” took your pictures and then sent it off to be “developed.” development meant … oh, never mind!)

Like refrigerators, these “memorable goods” are purchased infrequently. In any given quarter, many households don’t buy any. And then in another quarter they may buy a lot. In fact, the variability of people’s purchases on vacations and trips is twice that for their purchases of new and used autos — and about the same as for “tires, tubes, accessories and other parts.” Charming!

hai, Krueger and Postlewaite argue that consumption of these goods is so lumpy because, like fridges, the memories they produce keep on giving. People may seem to be consuming them unevenly but the memories linger on. As 20th-century consumption theorist Ira Gershwin put it: “The memory of all that/ No, no, they can’t take that away from me.”

If the economists are right, and people are consuming this 15 or so per cent of goods smoothly, as they enjoy the memories associated with them, and not lumpily, as the purchase data suggest, that means overall consumption may be smoother than the spending numbers indicate and less correlated with income — which would be more consistent with consumption theory.

This kind of thinking might help explain why people don’t seem to consume “enough” in retirement. The usual explanation is insufficient saving. but it’s possible the data understate retirees’ consumption by not giving any weight to memories they built up pre-retirement. Many of us do spend more time in retirement looking through family albums than we used to.

how might this all tie in with COVID? doubtless many people have spent time during the past year taking solace from good memories of pre-pandemic trips and fellowship. Of course, if such memories made us sad or wistful, they reduced our well-being. COVID itself will generate memories, some of them bad, though contemplating COVID once it’s over may even be enjoyable for anyone whose family or friends weren’t hit by it.

I don’t know what the theorists would predict but I’m guessing lots of us will respond to the fading away of COVID concerns by going out and spending energetically to replenish our memory banks. On Zoom these days you hear a lot about how people are hankering for their first post-pandemic restaurant meal or holiday trip. There has been speculation during the pandemic, as there was during World War II, about how consumption will respond once it’s all over. Worries about a consumption dip after the war proved unfounded. My guess is they’re unfounded now, too.

Most people will want to go out and make some new consumption memories.

COVID ITSELF WILL GENERATE MEMORIES.