Giffen Good

I was studying economics just before the financial collapse of 2008 (while composing, of course). Our speculative financial world, once dominated by big hedge funds, had been turned on its heals. I set out to compose a piece that would metaphorically acknowledge the trends rapidly shaping our new socioeconomic era.

A Giffen good is one that is consumed more as its price rises. As the price of alternative goods rises, the substitution effect causes consumers to buy less, and to seek out substitute goods. Violating the traditional law of demand, few of these goods have ever actually been found. The Irish potato famine is the classic example.

Since 2008, some have suggested that this mere footnote in an economics textbook has become a reality. The liquidity trap caused investors to sell off shares of increasingly higher risk stocks and buy low-risk, safe financial assets instead. Some have even suggested that gold, the ultimately liquid form of wealth, may be showing signs of “Giffenness.”

—Louis Goldford, 2014