What is market segmentation? At its most basic level, the term “market segmentation” refers to subdividing a market along some commonality, similarity, or kinship. That is, the members of a market segment share something in common.
I have argued before that the economy is illegible. By that I mean that aggregate measures of labor input, capital input, “the” price level, and output are useless when the economy is dominated by services and the value of labor and capital is dominated by intangible elements. Aggregate measures of “the” standard of living are useless when housing expense, which is a large component of living costs, is so divergent across locations.
Instead, I believe we need to think in terms of multiple economic realities. Perhaps one way to address this would be to start with market segmentation analysis. In the marketing world, demographic analysts have sorted U.S. zip codes into clusters of similar consumer tastes. Suppose that we were to find occupational clusters, consisting of people with similar industry groups and similar skill types.
Next, imagine a matrix, with occupational clusters down the side and consumer market segments across the top. Might we see interesting patterns?
We might think about the occupational clusters in terms of the traditional theory of international trade. What do they produce? What do they tend to consume? Which clusters supply savings to other clusters, and which receive savings? How much of each cluster’s economy is internal trade and how much is external trade? What are the terms of trade (exchange rate) between a cluster’s imports and its exports, and how have the terms of trade changed over time?
I am thinking that perhaps this is the next big theme I will be working on. That is, the illegibility of the economy as measured using traditional statistics and the possibility of getting more useful information by thinking in terms of multiple economic realities.