In his recent article “Renting Prosperity” (WSJ, May 5-6, 2012), Daniel Gross, raised the time honored question of “rent or buy?” and extended the discussion beyond merely homes and cars – venturing into textbooks and even clothing. I agree with his assessment that such decisions are good for our economy and our society. Alternative methods of asset possession increase economic efficiency by adding options for consumers. Those options will likely drive down the costs of usage, either by full ownership or by lease.
The question of “rent or buy” raises an even more fundamental question: does the average consumer have the basic tools to assess which option is best? Before a consumer can answer the ownership question, he or she must first understand his/her true financial condition. What assets and liabilities does one possess and how are they affected by the rent/buy decision. How does the rent/buy decision impact the individual’s cash flow and overall budget? I applaud Mr. Gross for raising the issue and suggest that it drives the consumer to ask even more fundamental questions.
I am interested in grabbing a copy of Mr. Gross’ new book, Better, Stronger, Faster: The Myth of American Decline and the Rise of the New Economy, as I expect to be equally enlightened by his assessment of the interesting subject of our future economy.