Your use of finance to show increased riskiness of households is interesting, too. I need to look at what you did more closely, but I was under the impression that all risk models are consumption models at base. Risk, or at least the kind households care about, is just the covariance of consumption with the discount factor. Households may be taking on higher default risk so they can smooth consumption further. So that sort of risk might not translate into the kind of risk households care about.

I don’t know the Merton model, but I suspect even there higher default risk isn’t always bad. Start-ups have high default risk, but we think giving them resources is a good idea.

Forgetting models, though, isn’t important to keep in mind there’s two parties to this increased debt of households? I assume banks know they’re leveraging up their customers.

Is your point that “autonomy” increasing goods are getting more expensive? Perhaps you need to do a Broda and Romalis and build a price index but weight for autonomy-increasingness. Is there some objective measure of autonomy-increasingness? You might be on to something; education and health care have gotten more expensive (but have their autonomy-increasing components?).