Society and Culture

Conspicuous consumption in the twenty-first century

One of capitalism’s supposed many flaws is the pointlessness and wastefulness of so much of the spending by the rich. Not only do many people believe that the resources devoted to building yachts could do better going to feed the poor, one argument goes that building the still-larger yacht does not even serve interests of the rich overall. The rich do not care about the pleasures the yacht may afford them; they care about using the yacht to demonstrate how far up on the pecking order they are. In economics jargon, the yacht is said to be a positional good and owning the yacht is conspicuous consumption, a form of status signaling.

But does this model at all correspond to reality in the 21st century? Your immediate reaction may be in the affirmative, but consider: what does the educated class think of someone like Donald Trump who has made a second career out of showing off his wealth? We collectively roll eyes at him. Do we think highly of the protagonists of The Fast and the Furious franchise, who stand at the top of the totem pole of driving overpowered cars and attracting beautiful women? Given that the series has transformed from unintentional farce to intentional farce over time, the answer to that question is obvious as well.

Rather, the way in which status is most effectively signaled today is to conspicuously reject all these things in specifically costly ways. Only the wrong (low status) types of people are the ones interested in pursuing crass consumerism. I document this in my new monograph with the Adam Smith Institute. Westerners, at the periphery of satire and academia, have begun to recognize this, but the fact has failed to truly enter public discourse and policy analysis.

You likely recognize some of these bits of culture. The TV show Portlandia and Christian Lander’s blog (and later 2008 book) Stuff White People Like dwell on this new mode of conspicuous consumption at length. The website tvtropes maintains an entire list.

We still, of course, observe the large yachts being constructed, but status and money have lost much of their correlation. University professors, artists, and public intellectuals are among our social elites, even if they often do not draw a six figure salary. Corporate lawyers and hedge fund managers may make more, but often feel obligated to apologize for it. Anyone the least bit self-reflective of our culture should be able to recognize that the conspicuous consumption of the actual social elite is not about ostentatiously displaying the fruits of the invisible hand. It’s about biting the invisible hand that feeds you.

But thinking through the implications of this may change the way we think of many behaviors. A degree in literature may seem useless. Yet in reality, it has a perfectly good use – to keep up in conversation and be able to reference Goethe at the high-status dinner parties. Managerial accounting has a social use, while in many cases the course in literature actually functions as an instrument for rent-seeking.

There is also a certain amount of creativity that goes into this new version of conspicuous consumption. The adventurous among us were the first to try sushi when it reached the West. But now the goal seems to be to continually outpace the march of McDonald’s in the developing world so as to experience “authentic” life outside the grips of globalization and neoliberalism. Beyond the questionable morality of treating impoverished villages as amusement parks, the amount of time, energy, and thought that goes into being the only tourist around could actually be used for something socially beneficial. More banally, members of Richard Florida’s “creative class” could spend their time thinking of new ideas for startups instead of locating Bands You Never Heard Of.

There is also the longstanding argument, most associated with Cornell economics professor Robert Frank, that consumption taxes should be imposed in such a way that reduces conspicuous consumption. But what he seems focused on is taxing crass consumerism. The relationship between crass consumerism and status is, at best, tenuous. In many social quarters it now signals low status. Even granting that some of the relationship persists, what is remarkable is that kinds of conspicuous consumption are given preferential treatments by governments, if anything.

The reason for this is clear, and it points to the reason why taxing real conspicuous consumption may be difficult or impossible. The “best” methods of conspicuous consumption are what the current social elite is engaging in at the moment. Whatever they are – degrees at universities, green energy, both of which receive plenty of preferential treatment – will be thought to be deserving by the elite. To ask a political system, inevitably governed by the elite in some manner, to tax conspicuous consumption will be heard as a call to tax the conspicuous consumption of the previous generation. And those are indeed are the goods Frank calls for being taxed.

The idea that traditional conspicuous consumption is socially wasteful, and therefore immoral, is something you may hear everywhere from Evangelical pulpits to Marxist sociologist college courses to the dinner table. It should not be surprising that many want to signal the opposite of it, but in doing so affluent Westerners swapped the trappings but kept the part that is actually socially wasteful. Since status signaling appears to be a permanent characteristic of human nature, perhaps all that should be unsurprising.

Ryan H. Murphy (@ryanhmurphy) is a research assistant professor at the O’Neil Center for Global Markets and Freedom at SMU Cox School of Business.