<p>Rampini elaborates on your idea (and also the Pratchett quote) <a href="https://www.aeaweb.org/articles?id=10.1257/aer.20170995" rel="nofollow noreferrer">in his AER article "Financing Durable Assets"</a>. See the abstract:</p>

<blockquote>
  <p>This  paper  studies  how  the  durability  of  assets  affects    financing.  We  show  that  more  durable  assets  require  larger  down  payments  making them harder to finance, because durability affects the price of assets and hence the overall financing need more than their  collateral value.  Durability  affects  technology  adoption,  the  choice  between  new and used capital, and the rent versus buy decision. Constrained firms invest in less durable assets and buy used assets. More  durable assets  are  more  likely  to  be  rented.  Economies  with  weak  legal  enforcement invest more in less durable, otherwise dominated assets and are net importers of used assets.</p>
</blockquote>

<p>Similarly, Orhun and Palazzolo study this argument in <a href="https://journals.sagepub.com/doi/full/10.1177/0022243718821660" rel="nofollow noreferrer">"Frugality Is Hard to Afford"</a> in the context of bulk buying large packets at low prices vs. only being able to buy small packets.</p>

<blockquote>
  <p>Intertemporal savings strategies, such as bulk buying or accelerating purchase timing to take advantage of a good deal, provide long-term savings in exchange for an increase in immediate spending. Although households with limited financial resources stand to benefit the most from these strategies, they are less likely to make use of them. The authors provide causal evidence that liquidity constraints impede low-income households’ ability to use these strategies, above and beyond the impact of other constraints. Exploiting recurring variation in household liquidity, this study shows that when low-income households have more liquidity, they partially catch up to higher-income households’ ability to use intertemporal savings strategies. The findings provide guidance to marketing managers and researchers regarding targeted promotional design and measurement of deal-proneness. For policy makers, they suggest a new path for decreasing the higher prices low-income households have been documented to pay for everyday goods. Policies have traditionally focused on increasing financial literacy or access to supermarkets. Our work suggests that providing greater liquidity can help low-income households make better use of savings opportunities already available to them.</p>
</blockquote>

CC BY-SA 4.0
2019-06-27T21:31:28.600Z
2019-06-27T21:31:28.600Z
Bayesian
<p>Consider the following quote from the book, <span class="math-container">$\textit{Men at Arms}$</span> by Terry Pratchett. </p>

<blockquote>
  <p>“The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.  </p>
  
  <p>Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles. </p>
  
  <p>But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.</p>
  
  <p>This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.”</p>
</blockquote>

<p>With what Pratchett wrote, I was thinking about a car-buying decision by a newly wed couple.</p>

<p>Consider two cars:<br>
1. Durable Car: sturdy, long-lasting, and safe for even kids when they are born. Looking ahead for about 10-15 years usage wihtout too much maintain break downs.<br>
2. Cheap Car: inexpensive, easy for commute, but expect maintenance cost to be high and possibly totaled withint 6-9 years.</p>

<p>Their financing needs are:<br>
1. Durable Car down payment: USD 10,000<br>
2. Cheap Car down payment: USD 2,000</p>

<p>Their monthly leasing fees are:<br>
1. Durable car monthly leasing fee: USD 200<br>
2. Cheap car monthly leasing fee: USD 300</p>

<p>There are two newly wed couples: a financially affluent one, and a poverty stricken one.</p>

<p>Control all other factors such as credit score of both couples, financing terms and horizon, etc.</p>

<p>According to Pratchett, the poor couple would always resort to the cheap car option while the rich couple always resorts to the durable car option. Do you agree? What are your thoughts?</p>

CC BY-SA 4.0
2019-06-27T05:00:21.497Z
I'm voting to close this question as off-topic because it does not seem to be a good fit for the SE format. You can see this yourself as you struggle in the end to ask an actual question.
Giskard
CC BY-SA 4.0
2019-06-27T05:20:21.473Z
@Giskard This is not off topic. It is related to durable capital and financing. There is a question being asked at the end. Are you blind?
Frank Swanton
CC BY-SA 4.0
2019-06-27T06:40:35.793Z
Please read my comment again without rage. Also read [this meta answer on open ended questions](https://meta.stackexchange.com/a/163216/299818).
Giskard
CC BY-SA 4.0
2019-06-27T06:45:06.477Z
I think you have the rage issue tbh. A piece of evidence is that you even deleted your comment on one of the responses that was written to my question. why are you so shy? your belligerence appalls me. Please do not abuse your reputation status. Just because you have been around the hood long enough does not give you the authority to initiate a closing vote on a legitimate question. Good God...
Frank Swanton
CC BY-SA 4.0
2019-06-27T06:47:06.900Z
1. I have no idea what you are referring to, please be more precise. You can even link to the answer. I do delete my comments sometimes.
Giskard
CC BY-SA 4.0
2019-06-27T06:47:09.523Z
2. My reputation literally gives me the authority to initiate a close vote. If I am abusing my authority other people will disagree and vote to leave open.
Giskard
CC BY-SA 4.0
2019-06-27T06:49:09.973Z
3. I am not sure you see the issue here. The question is open ended. It does not really have a definitive answer. It goes: [story] "Do you agree? What are your thoughts?" Most questions like this cannot be answered in a definitive way. They may be fine questions, but not for the SE format.
Giskard
CC BY-SA 4.0
2019-06-27T07:05:25.763Z
@Giskard No time to argue with you. My point is your initiation is groundless. The question has a specific reference and the question is framed in such a way that evokes the idea of durable asset financing and choice a rich and poor consumer can make. Please stop. Once again, your hostility appalls me. Please stop and be respectful.
Frank Swanton
CC BY-SA 4.0
2019-06-27T20:05:19.410Z
A general (1.) and a specific (2.) comment:
1. SE follows a strict format and open discussions a la "what do you think?" are generally seen as a bad fit. This does not mean that it is an uninteresting topic. The community is asked to follow the protocol so that Giskard is right to raise this point and the community can vote on it. Please don't read it as a personal attack or hostility. I certainly didn't read it that way.
2. What kind of answer are you looking for? There is a literature on "planned obsolescence", is this what you search?
Bayesian
CC BY-SA 4.0
2019-06-27T21:09:20.223Z
What @Bayesian said, plus: there’s also a literature on the high cost of being poor, which is how I’ve always read that Pratchett quote— it’s not that poor people make an unconstrained choice to use goods and services that are more expensive over their lifetime, it’s that they face budget or other constraints that rule out other possibilities.
dismalscience
CC BY-SA 4.0
2019-06-27T23:28:49.377Z
@dismalscience thank you for the comments related to the questions! Much appreciated!
Frank Swanton
CC BY-SA 4.0
2019-06-27T23:30:44.357Z
@Bayesian Thanks for the comments related to the question! Just a quick response to your SE comment. First, I do have a specific question, which is "Do you agree with what Pratchett postulates? Thus what are your thoughts?" One cannot equivocate "what are your thoughts" as an open-ended question and treat it as it violates the SE standard, particularly when it is taken out of context.
Frank Swanton
CC BY-SA 4.0
2019-06-27T23:33:34.827Z
@Bayesian Giskard has responded to my questions mostly with comments previously, and you can see that unless he deletes the evidence, but he has been hostile in many of the comments he made. So when a person, albeit whatever reputation currency he has on this forum, with such belligerent history raises a vote to close, I reserve the right to defend my question. What are his grounds on raising such a vote: the OP struggles to answer a question? There is a specific reference, a specific example, and two questions in English.
Frank Swanton
CC BY-SA 4.0
2019-06-27T23:35:05.967Z
@Bayesian Hence, to equivocate every question that ends with "what are your thoughts" to a bad-quality and non-SE standard-abiding question is a poor way to treat members here and foster intellectual discourse. Plus, I have already explained he has a history of being blindly hostile. I am sure if you track down his comments on other users, the pattern in the behavior is conspicuous.
Frank Swanton
CC BY-SA 4.0
2019-06-27T23:36:27.043Z
@Bayesian In any case, always appreciate the demeanor in which you conduct yourself in this intellectual discourse. This forum needs someone like you who understand a code of decorum and what "questions" are in general and not take them out of context.
Frank Swanton
<decision-theory><choice-theory>
Boots' Theory by Pratchett
Frank Swanton
# Boots' Theory by Pratchett

(Asked by: username_0 on 2019-06-27)

Consider the following quote from the book, $\textit{Men at Arms}$ by Terry Pratchett.

> “The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.
>
> Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.
>
> But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.
>
> This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.”

With what Pratchett wrote, I was thinking about a car-buying decision by a newly wed couple.

Consider two cars:  
1. Durable Car: sturdy, long-lasting, and safe for even kids when they are born. Looking ahead for about 10-15 years usage wihtout too much maintain break downs.  
2. Cheap Car: inexpensive, easy for commute, but expect maintenance cost to be high and possibly totaled withint 6-9 years.

Their financing needs are:  
1. Durable Car down payment: USD 10,000  
2. Cheap Car down payment: USD 2,000

Their monthly leasing fees are:  
1. Durable car monthly leasing fee: USD 200  
2. Cheap car monthly leasing fee: USD 300

There are two newly wed couples: a financially affluent one, and a poverty stricken one.

Control all other factors such as credit score of both couples, financing terms and horizon, etc.

According to Pratchett, the poor couple would always resort to the cheap car option while the rich couple always resorts to the durable car option. Do you agree? What are your thoughts?

**Tags:** decision-theory, choice-theory
> **Comments:**
> **username_1**: I'm voting to close this question as off-topic because it does not seem to be a good fit for the SE format. You can see this yourself as you struggle in the end to ask an actual question.  
> **username_0**: @Giskard This is not off topic. It is related to durable capital and financing. There is a question being asked at the end. Are you blind?  
> **username_1**: Please read my comment again without rage. Also read [this meta answer on open ended questions](https://meta.stackexchange.com/a/163216/299818).  
> **username_0**: I think you have the rage issue tbh. A piece of evidence is that you even deleted your comment on one of the responses that was written to my question. why are you so shy? your belligerence appalls me. Please do not abuse your reputation status. Just because you have been around the hood long enough does not give you the authority to initiate a closing vote on a legitimate question. Good God...  
> **username_1**: 1. I have no idea what you are referring to, please be more precise. You can even link to the answer. I do delete my comments sometimes.  
> **username_1**: 2. My reputation literally gives me the authority to initiate a close vote. If I am abusing my authority other people will disagree and vote to leave open.  
> **username_1**: 3. I am not sure you see the issue here. The question is open ended. It does not really have a definitive answer. It goes: [story] "Do you agree? What are your thoughts?" Most questions like this cannot be answered in a definitive way. They may be fine questions, but not for the SE format.  
> **username_0**: @Giskard No time to argue with you. My point is your initiation is groundless. The question has a specific reference and the question is framed in such a way that evokes the idea of durable asset financing and choice a rich and poor consumer can make. Please stop. Once again, your hostility appalls me. Please stop and be respectful.  
> **username_2**: A general (1.) and a specific (2.) comment: 1. SE follows a strict format and open discussions a la "what do you think?" are generally seen as a bad fit. This does not mean that it is an uninteresting topic. The community is asked to follow the protocol so that Giskard is right to raise this point and the community can vote on it. Please don't read it as a personal attack or hostility. I certainly didn't read it that way. 2. What kind of answer are you looking for? There is a literature on "planned obsolescence", is this what you search?  
> **username_3**: What @Bayesian said, plus: there’s also a literature on the high cost of being poor, which is how I’ve always read that Pratchett quote— it’s not that poor people make an unconstrained choice to use goods and services that are more expensive over their lifetime, it’s that they face budget or other constraints that rule out other possibilities.  
> **username_0**: @dismalscience thank you for the comments related to the questions! Much appreciated!  
> **username_0**: @Bayesian Thanks for the comments related to the question! Just a quick response to your SE comment. First, I do have a specific question, which is "Do you agree with what Pratchett postulates? Thus what are your thoughts?" One cannot equivocate "what are your thoughts" as an open-ended question and treat it as it violates the SE standard, particularly when it is taken out of context.  
> **username_0**: @Bayesian Giskard has responded to my questions mostly with comments previously, and you can see that unless he deletes the evidence, but he has been hostile in many of the comments he made. So when a person, albeit whatever reputation currency he has on this forum, with such belligerent history raises a vote to close, I reserve the right to defend my question. What are his grounds on raising such a vote: the OP struggles to answer a question? There is a specific reference, a specific example, and two questions in English.  
> **username_0**: @Bayesian Hence, to equivocate every question that ends with "what are your thoughts" to a bad-quality and non-SE standard-abiding question is a poor way to treat members here and foster intellectual discourse. Plus, I have already explained he has a history of being blindly hostile. I am sure if you track down his comments on other users, the pattern in the behavior is conspicuous.  
> **username_0**: @Bayesian In any case, always appreciate the demeanor in which you conduct yourself in this intellectual discourse. This forum needs someone like you who understand a code of decorum and what "questions" are in general and not take them out of context.  

---

## 1 answers

### Answer by username_2 on 2019-06-27. Score: 4 | Accepted answer

Rampini elaborates on your idea (and also the Pratchett quote) [in his AER article "Financing Durable Assets"](https://www.aeaweb.org/articles?id=10.1257/aer.20170995). See the abstract:

> This paper studies how the durability of assets affects financing. We show that more durable assets require larger down payments making them harder to finance, because durability affects the price of assets and hence the overall financing need more than their collateral value. Durability affects technology adoption, the choice between new and used capital, and the rent versus buy decision. Constrained firms invest in less durable assets and buy used assets. More durable assets are more likely to be rented. Economies with weak legal enforcement invest more in less durable, otherwise dominated assets and are net importers of used assets.

Similarly, Orhun and Palazzolo study this argument in ["Frugality Is Hard to Afford"](https://journals.sagepub.com/doi/full/10.1177/0022243718821660) in the context of bulk buying large packets at low prices vs. only being able to buy small packets.

> Intertemporal savings strategies, such as bulk buying or accelerating purchase timing to take advantage of a good deal, provide long-term savings in exchange for an increase in immediate spending. Although households with limited financial resources stand to benefit the most from these strategies, they are less likely to make use of them. The authors provide causal evidence that liquidity constraints impede low-income households’ ability to use these strategies, above and beyond the impact of other constraints. Exploiting recurring variation in household liquidity, this study shows that when low-income households have more liquidity, they partially catch up to higher-income households’ ability to use intertemporal savings strategies. The findings provide guidance to marketing managers and researchers regarding targeted promotional design and measurement of deal-proneness. For policy makers, they suggest a new path for decreasing the higher prices low-income households have been documented to pay for everyday goods. Policies have traditionally focused on increasing financial literacy or access to supermarkets. Our work suggests that providing greater liquidity can help low-income households make better use of savings opportunities already available to them.


---

