You mentioned rice as prototypical Giffen good. In what sense does increasing the price of rice make rice less efficient? It certainly does not change the nutritional attributes of the rice.
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Replying to @ModelOfTheory
right, it's the same rice for more money, hence less efficient.
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Replying to @admittedlyhuman
Oh, I see. I think you are conflating high value with high diminishing marginal returns. As prices of each rise, value/$ spent on Veblen goods rises, and it takes more $ to reach diminishing marginal returns on Giffen goods. These effects are not in conflict.
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Replying to @ModelOfTheory
the Giffen paradox is about the income effect. if your value/$ spent is going up, the income effect is in the wrong direction
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Replying to @admittedlyhuman @ModelOfTheory
when the price of a veblen good goes up people buy more of it because it's a better deal. people getting better deals are richer not poorer
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Replying to @admittedlyhuman
No, the income effect is about amount of $ available, not value/$.
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Replying to @ModelOfTheory @admittedlyhuman
You need some X. Price of X goes up, making you unable to afford expensive signalling good Y, motivating you to buy more X as an (inferior to Y) signal of wealth. Simultaneously, higher price of X improves it as a signal, also motivating you to buy more. X is Giffon and Veblen.
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Replying to @ModelOfTheory
but X is now better as a signal of wealth than it was, so I don't need as much of it, so I can still buy Y.
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Replying to @admittedlyhuman @ModelOfTheory
if my money commands more value that's effectively income, even if my nominal dollars remain the same.
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Replying to @admittedlyhuman
Goods that signal wealth can also serve other purposes as well. Purchasing less X so you can afford Y might have other drawbacks, even if it more effectively signals wealth.
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Price of rice goes up. You can't afford as much meat now, so you buy more rice. High rice prices have made body fat a signal of wealth, so you buy more rice to gain weight. Rice is Giffen and Veblen.
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