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The Edamame Economy or Just Conspicuous Consumption?

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According to David Brooks in his op-ed "The Edamame Economy" (all quotations are from the Brooks piece unless otherwise indicated), we've shifted from "the lima bean economy to the edamame economy." Brooks views this shift as a cause for celebration, because the edamame economy makes us "significantly better off." However, the edamame economy is (at least in part) a synonym for conspicuous consumption, and its growth a consequence of rising income inequality.

Mr. Brooks asserts that (a) with newer technologies, marketers can better customize their products to specific population segments, and (b) we've entered a new age, with consumers who have much "higher levels of cultural competence." The result of these trends is the edamame economy, where consumers shift from bland lima beans to exotic edamame, and from bland hotels to mass boutique hotels. I believe that (a) is true, but I doubt that (b) is happening.

"Mass boutique hotels" have been hyper-customized to meet, for a premium price, the "psychographic profiles" of aspiring young knowledge economy workers. According to the theory of edamame economics, such "nichification" and "segmentation" produce what these knowledge consumers want: hotels that Mr. Brooks himself describes as "on one level, kind of ridiculous. They are almost invariably too dark throughout, making it hard to read. The bed is often too low. The bathroom door is sometimes a flimsy sliding shutter, sacrificing privacy for style."

Paying a premium to stay in a hotel that's "kind of ridiculous" isn't evidence of a "higher level of cultural competence." But the rise of mass boutique hotels is consistent with conspicuous consumption.

In the roaring twenties (with roaring income inequality), people frequented ridiculously luxurious hotels to make a statement that they were rich (or at least wanted people to think they were). In today's knowledge economy, people again stay in overly expensive hotels with a certain cachet because they are places to be seen. They signal that the hotel guest has money and success (or at least wants others to believe that's so).

A mass boutique hotel might provide a more luxurious experience than a Comfort Inn, which explains part of the price premium. But another part of that price premium displays that one can afford to be seen in a certain place, with certain people.

Technology has certainly made it easier for entrepreneurs to segment consumers and address specific niches. This ability to more specifically target products benefits both consumers and producers.

And eating edamame, staying in mass boutique hotels, drinking designer water, and so on are harmless ways for America's economic elite to flaunt the exclusivity that monèy can buy. But I'm not convinced this reflects a new, higher level of "consumer cultural competence" or has made us "significantly better off."

The edamame economy is a partial consequence of another trend of the last thirty years: America's rising inequality. Income inequality in the United States is now at the highest level since 1928. Since 1982, the average income of the bottom 40 percent of American households has barely changed, while the average income of the top 5 percent of American households has increased by 70 percent (all calculations in constant 2012 dollars; source: United States Census Historical Income Tables Households, H-3).

So while wealthier Americans can now eat edamame regularly, 15 percent of American households are food-insecure (that is, lacking access to enough food for an active, healthy life for all household members). While knowledge workers enjoy mass boutique hotels, on any given January evening nearly 140,000 American children are homeless (living in shelters or on the street).

If you're a private-sector entrepreneur, participating in the edamame economy is shrewd: Growth in consumer spending has primarily been in the upper income groups.

But from a public-policy point of view, the rise of the edamame economy isn't a cause for celebration. It's just another consequence of rising American income inequality.

Steven Strauss is an adjunct lecturer in public policy at Harvard's Kennedy School of Government. Immediately prior to Harvard, he was founding Managing Director of the Center for Economic Transformation at the New York City Economic Development Corporation. Steven was one of the NYC leads for Applied Sciences NYC (Mayor Bloomberg's plan to build several new engineering and innovation centers in NYC), NYC BigApps and many other initiatives to foster job growth, innovation and entrepreneurship. In 2010, Steven was selected as a member of the Silicon Alley 100 in NYC. He has a Ph.D. in Management from Yale University, and over 20 years' private sector work experience. Geographically, Steven has worked in the U.S., Asia, Europe and the Middle East.