Will the era of conspicuous consumption wind down?

by on January 13, 2012 at 9:31 am in Uncategorized | Permalink

Rick Bookstaber writes:

And one notable area of consumption that by definition differentiates the classes, that of conspicuous consumption, is going by the wayside. Yes, I believe we are seeing the twilight of the era of conspicuous consumption. Not that Gucci and Chanel are going to go out of business, but for most people that sort of status statement is increasingly becoming irrelevant. No matter what you are wearing and driving, a far better picture of you and your status is just a few clicks away. You don’t have to drive a Ferrari to let everyone know you are rich and successful. If you are driving a Ferrari, what it will convey is that you – who as everyone who cares to Google you knows is running a hedge fund and is worth tons of money – must like a Ferrari.

Of course in Silicon Valley, the conspicuous consumption norm is already relatively weak among the wealthy, at least as that norm was traditionally understood.  Yet you can think of a web company itself as the new “conspicuous” — “look at what I’ve done!”

joe January 13, 2012 at 9:48 am

Bragging about a web company is conspicuous *production*.

Anonymous coward January 13, 2012 at 9:52 am

Not if the web company helps users waste time. Most of them do, or they help other web companies help users waste time, or… you get the picture.

vm January 13, 2012 at 9:56 am

Yes, any product that entertains the user “wastes time” and is therefore useless. WHY ARE YOU WATCHING A MOVIE/READING A BOOK/PLAYING A GAME WHEN YOU COULD BE WORKING IN THE TRACTOR FACTORY AND BOOSTING INDUSTRIAL PRODUCTION!?!?!?!?

Anonymous coward January 14, 2012 at 4:16 am

Why are you playing Angry Birds/Minecraft/posting useless comments on blogs when you could be fixing your caps lock key?

gwern January 13, 2012 at 11:26 am

Indeed. With consumption, there would seem to be a deadweight loss – the cost of credibly producing something which everyone knows is conspicuous and can’t be easily forged. If 10 monks must labor 10 years to make your watch, that may make it unforgeable but on the other hand, you don’t get any out of the watch you didn’t from a cheap quartz watch, so you just blew 100 man-years so someone poorer can’t pretend to have a monk watch too. Much better to instead have a company with some innovation or other.

rpl January 13, 2012 at 9:53 am

This seems way off the mark. Look closely at this phrase:

who as everyone who cares to Google you knows is running a hedge fund and is worth tons of money

And how many people our hedge fund manager meets during a day care to Google him, on the (unlikely) chance that there is something interesting to find out about him? On the other hand, when he pulls up in a Ferrari, you know right away that he’s rich, even if you specifically avoid looking up information about people you meet. Therefore, people who care about impressing people who won’t be bothered to Google them will continue to spend money on conspicuous consumption. Overall I wouldn’t expect it to have much effect on the amount of conspicuous consumption that goes on.

Akidderz January 13, 2012 at 10:20 am

I feel like Hanson would have something wise to say about this kinda of signaling being exactly what the Ferrari driver is going for.

albatross January 13, 2012 at 10:25 am

I’m guessing the Ferrari helps more with picking up girls than the really impressive stuff about you that comes up from a Google search….

CBBB January 13, 2012 at 12:40 pm

+1
But then again what do economists know about picking up girls

Andrew' January 13, 2012 at 1:24 pm

No decent girl would be seen in a Ferrari.

http://www.youtube.com/watch?v=AO7XvOt9suM

CBBB January 13, 2012 at 4:31 pm

+1 Good show

Finch January 13, 2012 at 10:01 am

There’s a significant conspicuous non-consumption trend. Drive around any pricey neighborhood and you’ll see many driveways with a Honda Civic in there. As a society, it might make sense for us to subsidize the purchase of safer cars for such big sources of tax revenue! But people buy them because they signal “look I’m one of you!”.

Similarly, you occasionally see otherwise rational elites claiming preference for bad, poor-people food as a way of signaling their non-capture by the elite. You know. Occasionally.

jmo January 13, 2012 at 11:34 am

Drive around any pricey neighborhood and you’ll see many driveways with a Honda Civic in there.

Yes, because they bought way too much house and after PITI a Civic is all they can afford. Or it belongs to the kids, the nanny or the housekeeper.

Finch January 13, 2012 at 11:56 am

It’s possible generally, but I know people who do this, and that’s not what they’re doing. They deliberately purchased the anti-Escalade. They are making a show of living beneath their means.

I find it hilarious.

Rob in CT January 13, 2012 at 12:49 pm

I bought a (used) Honda civic, depite the fact I could have “afforded” a Mercedes. This was not done to show anybody anything. I think the civic is a perfectly solid car that we use to commute to work. I saw no additional value added for me in purchasing [insert pricier car here]. The end.

This is the new snooty? WTF?

Popeye January 13, 2012 at 1:13 pm

Screw you, jackass! You think you’re better than us?
#justkidding

Finch January 13, 2012 at 2:38 pm

Surely a larger car would be safer?

http://www.iihs.org/externaldata/srdata/docs/sr4204.pdf

This is from 2007. The Honda Civic has 74 deaths per million registered vehicle years. The least safe Mercedes model has 24.

But my understanding is that safety comes first with mass, second with linear dimension, and only third with cost.

CBBB January 13, 2012 at 6:42 pm

Deaths/Million Registered Vehicle Years? Is this a good statistic to measure safety with?

Finch January 15, 2012 at 1:10 pm

> Is this a good statistic to measure safety with?

It’s hard to come up with something that covers every possible confound.

There’s an argument that it favors urban vehicles which are driven fewer miles at lower speeds. I.e., it will make Honda look artificially good with respect to Mercedes.

Finch January 15, 2012 at 1:17 pm

Another important thing to keep in mind is that the various star ratings for safety are weight-classed and therefore grossly exaggerate the relative safety of small vehicles.

jmo January 13, 2012 at 1:21 pm

They deliberately purchased the anti-Escalade. They are making a show of living beneath their means.

Or, that’s the story they tell to explain away the fact they can barely pay their mortgage.

JWatts January 13, 2012 at 1:50 pm

+1

Finch January 13, 2012 at 1:54 pm

heh heh. Touche.

Zamba January 13, 2012 at 12:18 pm

“Drive around any pricey neighborhood and you’ll see many driveways with a Honda Civic in there.”

hahaha… I laughed on this statement. Here in Brazil the Honda Civic is kind of an upper middle class dream. You know… poor country plus lots of taxes.

Let me check the price. In the Honda website for Brazil, the most basic Civic costs R$ 67,340, which is about US$ 39,600. The price in the Honda website for the USA is US$ 15,800.

CBBB January 13, 2012 at 12:42 pm

What’s wrong with a Honda Civic? Cars in general are just money pits I see them only as a cost

jmo January 13, 2012 at 1:20 pm

I see them only as a cost

So are booze and food – do you only eat beans and rice and drink water?

CBBB January 13, 2012 at 1:44 pm

That’s nonsense though because eating and drinking are intrinsically great where as getting stuck in traffic, paying some scam artist mechanic to maintain your car, getting ripped off by your insurance company and buying gas are terrible – and all those things are the reality of driving.

jmo January 13, 2012 at 3:04 pm

getting stuck in traffic

Is a lot more comfortable if your seat is heated in winter, cooled in summer and features a massage function.

CBBB January 13, 2012 at 6:33 pm

I’m sure you can get a Honda with those features. I’m against cars in general though – I’m not talking about car brand status here, I mean I think all of them are money pits.

JWatts January 13, 2012 at 1:55 pm

“Drive around any pricey neighborhood and you’ll see many driveways with a Honda Civic in there.”

I think you meant to say, “Drive around any pricey neighborhood and you’ll see many driveways with a Toyota Prius in there.”

Finch January 13, 2012 at 1:58 pm

It does work better that way.

Bill January 13, 2012 at 2:17 pm

Although, having many driveways may be a sign of conspicuous consumption, even if you drive a Civic.

JWatts January 13, 2012 at 2:45 pm

Particularly if the Civic is the +1 car. I.E. you alreadt have enough vehicles for everyone in the family, This is the +1 car, as a spare.

Finch January 13, 2012 at 6:19 pm

Finch Manor has two driveways…

johnnyo January 13, 2012 at 10:03 am

re: Silicon Valley vs., say, NYC I’m reminded of:

http://www.paulgraham.com/cities.html

Different cities have different currencies of status.

Thomas January 13, 2012 at 10:10 am

This is just Bookstaber’s attempt to say that, though he’s really rich and used to be a Wall Street and then fund guy, he’s just like you, Mr./Ms. Civil Servant/Congressman/Professor/Silicon Valley entrepreneur. It’s an entirely costless way for him to signal cultural affinity–if you wonder why his consumption patterns don’t match yours, well, it’s because he really likes his 7 Series, not because he’s trying to impress anyone.

Status games can be played lots of different ways.

Popeye January 13, 2012 at 1:13 pm

Are you trying to impress me? If so you’re not succeeding.

Adrian Ratnapala January 13, 2012 at 10:26 am

I don’t beleive it.

Our methods of social-signal derive from deep instincts. We don’t try to signal that we are rich, we try to signal that we are *cool*, which indirectly signals the other stuff. The definition of cool will change from decade to decade, but not people can be googled. Facebook &c. will change things slightly, people will still want to strut their stuff in each-other physical presence.

It also varies from place to place, and I suppose in silicon valley you can be cool by building a model railway, or putting a giant green robot in your front yard. Which is another form of conspicous consumption.

Bill January 13, 2012 at 2:22 pm

You can consume green, pay more, and be conspicuous about it, though I suppose it is better than consuming non green and being conspicuous about it. If green is more costly, you get a twofer–you grat to consume whatever it is that non greens competively consommé, and you get to pay more for it. Go Virgin Airlines.

anon January 14, 2012 at 10:50 am

You can consume green, pay more, and be conspicuous about it

Like putting a TerraPass bumper sticker on your car….

Anecdotally, I am seeing a movement by my wealthy and upper middle class acquaintances to less overt signalling of wealth by many and truly lowering consumption as a desire to simplify their lives by a few. More of them are realizing that above a certain level, more income does not make them any happier, and the truth of the saw “You don’t own your stuff, your stuff owns you.”

And some of them just want to lower their visibility to thieves and the government.

albatross January 13, 2012 at 10:28 am

So, would we classify open source projects, academic publications, ethnic food guides, etc., as conspicuous consumption?

Master of None January 13, 2012 at 10:32 am

It’s funny, Americans may consume less “conspicuous” items, but in China status symbol purchases are booming… they already have the BMW sedan, the Breitling chronograph, the Gucci shoes, but they need something else… maybe a Louis Vuitton shoulder bag.

Here’s an article in the LA Times about the trend of “alpha males” wearing purses in China:
http://articles.latimes.com/2011/feb/07/business/la-fi-china-man-purse-20110207

bjartur January 13, 2012 at 3:43 pm

I didn’t know about the man purses, but I second MoN’s point in general. It may be winding down here but it’s winding up in China. Which is the more important trend?

Turkey Vulture January 13, 2012 at 10:42 am

Jewel-encrusted golden codpieces are the next status signal. Just you watch.

Dave January 13, 2012 at 10:46 am

I have nothing to add other than Bookstaber is always worth reading. Recommended for any RSS reader.

charlie January 13, 2012 at 10:55 am

Was this Tyler or alex?

Here is a hint: things that signified wealth in oughts will not do so in the teens.

Rinse and repeat.

Steven Kopits January 13, 2012 at 11:01 am

Conspicuous consumption has value if it differentiates you from others, ie, if it influences social ordering. However, with declinng marginal utility of wealth and income, the scope for such differentiation decreases. Thus, in a poor country, driving a sports car will cause police to stop you just to look at the engine (I had this experience in post-communist Hungary). However, in a rich country, dress, for example, cannot distinguish you. Most everyone can afford clothes that are indistinguishable to the average observer. Hence, Bill Gates wears a sweater.

Similarly, in a poor country, financial security counts for a lot, so women will be attracted to men who can provide it (again, in post-communist Hungary, it wasn’t hard to attract girls by waiving a US passport). But at even relatively middlie income levels, that appeal wanes, and the intrinsic attractiveness of the person dominates their financial status.

This then is the liberal (fiscally conservative) response to egalitarians. That equality is achieved not re-distributing income, but by moving average income up. Social equality is achieved by the curve of income and wealth line. Whereas egalitarians are forced to argue a static model (take what we have and re-distribute it), liberals (fiscal cons) use this same model, but argue it dynamically, that over time, increasing incomes will do far more to achieve equality than static re-distribution.

SouthCarolinian January 13, 2012 at 5:25 pm

That’s ridiculous–a shearling jacket, some real shoes, custom suit will cost you $10,000 and signal a lot!

Steven Kopits January 13, 2012 at 11:37 pm

Maybe in South Carolina.

Ricardo January 14, 2012 at 3:25 am

A news article a while noted with an air of contempt that Ben Bernanke wears “off the rack” suits. Needless to say, Barack Obama, Mitt Romney or any Wall Street CEO do not. There is signaling in clothing — it’s just that it helps differentiate the top 0.1% from his fellow 1%-ers.

anon January 13, 2012 at 11:13 am

All consumption is conspicuous. On a completely unrelated note, have you blogged about any authentic Ulan Baator-style Mongolian restaurants lately?

msgkings January 13, 2012 at 12:13 pm

Zing!

anon January 13, 2012 at 3:39 pm

On a completely unrelated note….

LOL

Hoosier January 13, 2012 at 11:28 am

This phenomenon has happened big time in Japan over the last ten years. Its why even if Japan is doing better economically numberwise than it is often made out to be, the place still feels like its in a long downturn.

Brian January 13, 2012 at 11:41 am

Conspicuous consumption is a manifestation of status signalling/desire. There is no way, absolutely no way that the latter will ever go away. It would take a huge change to get rid of the former.

TallDave January 13, 2012 at 11:41 am

Well, we’re probably not typical, but my wife and I will actually pay about 20% more in taxes than we spend on everything else combined this year.

Urso January 13, 2012 at 3:45 pm

Does this mean you’re working for no reason?Unless, I guess, you’re planning to retire at 40. Or if you just intrinsically enjoy the day to day life of an accountant.

TallDave January 13, 2012 at 9:28 pm

I like money.

TallDave January 13, 2012 at 9:30 pm

Also, I would like to retire at 40, or perhaps more accurately I fear I will be laid off at 40 and never work again. (Or is that just a reason I like money?)

CBBB January 13, 2012 at 10:54 pm

Yeah because you’re in IT – that’s why IT sucks your career comes to a screeching halt once you’re “too old”

Seth January 13, 2012 at 11:41 am

If you’re looking to pick up girls without buying a Ferrari, or producing wealth or actually doing much, you can employ Barney Stinson’s Lorenzo von Matterhorn’s strategy.

Matt January 13, 2012 at 12:35 pm

Conspicuous consumption is alive and well in silicon valley, it just takes on a somewhat perverse, moralizing form.

Norman Pfyster January 13, 2012 at 12:43 pm

I can only assume that Oracle is not in SV. Larry Ellison is the king of conspicuous consumption.

Foobarista January 13, 2012 at 1:00 pm

I live in SV and conspicuous consumption is alive and well, although instead of fancy purses, it’s artisan food, $500/month “exclusive'” gyms, living in an insanely expensive school district, getting $200K kitchen makeovers, and driving a BMW SUV (the latter is still recognizably old-fashioned).

somaguy January 13, 2012 at 2:44 pm

“artisan food”

I chuckled but it’s true.

Matt January 13, 2012 at 3:47 pm

There’s also a fair amount of Ferraris in Palo Alto/SV, now that I think of it. The area’s consumption-based signalling is actually quite frenetic.

Benny Lava January 13, 2012 at 1:02 pm

I don’t think you know what conspicuous consumption means.

jim January 13, 2012 at 1:28 pm

It won’t go away. People are too lazy to do a quick google search. And reading that someone is rich and powerful doesn’t have the same emotional impact as seeing they are rich and powerful.

Silicon Valley types might not dress like they are rich, but they act and are very visibly treated like they are rich.

When Bill Gates or Steve Jobs would walk in the room it was clear to everyone they were important, regardless of how they dressed.

CBBB January 13, 2012 at 1:46 pm

I’m against this Silicon Valley slacker dress code. Walking around in some shitty t-shirt and worn out jeans is unacceptable, it’s nothing more then some 1960s hippy holdover by a bunch of people who want to still pretend they’re radical and anti-establishment.

Urso January 13, 2012 at 3:49 pm

I am forced to agree with this.

CBBB January 13, 2012 at 4:32 pm

It’s just common sense. Why do these people want to wander around looking like slobs? Any opportunity to dress up should be taken.

Ricardo January 14, 2012 at 3:33 am

Steve Jobs leased a new Mercedes every six months; since CA law allows one to drive a new car without license plates for six months, Jobs never drove with a license plate on his car.

KLO January 13, 2012 at 1:55 pm

The 30 year debt binge and credit bubble severed the connection between consumption and wealth. A BMW or even a Ferrari is about as reliable a predictor of wealth now as whether someone rides a bike to work.

Steven Kopits January 13, 2012 at 11:59 pm

BMW and Mercedes are advertising during football games. It’s the Mercedes-Benz Superdome in New Orleans now. These are now mass market luxury cars, otherwise they wouldn’t advertise between Southwest Airlines and Quisnos ads. And consider the vehicles. BMW’s and MB’s are great cars, but in the 1970s, there was a huge gap between them and a mass market product. Nowadays, you can buy a Honda Accord that, for all but the emblem, can do everything in terms of quality, performance and interior finish and design that high end German car can do. Little difference in the sound system, either. So is it prestigious to have a nice car? Sure. But middle managers with decent jobs can afford one.

Finch January 15, 2012 at 7:52 pm

For what it’s worth, the article I cited above indicates there’s a huge safety gap between Mercedes and Honda.

David Clausen January 13, 2012 at 2:32 pm

Your comment about the reduced level of conspicuous consumption the Silicon Valley is half right. Material consumption of conspicuous goods is much lower than would be expected given the income level (although it is far from absent). This is not to say that conspicuous consumption in general is absent it just takes a simpler and more subtle form as alluded in your google comment. People here often consume with their attention and how and where they choose to spend their time. Their time is incredibly valuable and where and how they choose to dispose of it signals status. This is often very publicly signaled (websites, blogs, twitter, social events, demos)… at least on the web.

Manolis January 13, 2012 at 2:39 pm

Prosperity bubbles will trigger all sorts of social signaling behaviors. The only thing that changes is the language that such signaling occurs in. One could argue though that there exist objectively better and more ethical such “languages”. For instance, Silicon Valley or Boston over NYC…

Despite Bookstaber’s wishful thinking, luxury boutique/dept store sales in both the Valley and the greater Connecticut are marking fresh highs right now. What does that tell us?

While I agree with RB’s main thesis, I think it hasn’t become *that* prevalent of a trend yet, at least not amongst the finance elite which are by default….conspicuous.

alkali January 13, 2012 at 6:44 pm

As Thorstein Veblen famously remarked, “Gucci Gucci, Louis Louis, Fendi Fendi, Prada/Basic b*tches wear that sh*t so I don’t even bother.” Or maybe that was Kreayshawn, I can’t remember.

NAME REDACTED January 13, 2012 at 10:25 pm

Could a Keynesian argue that this is why AD is low?

John David Galt January 14, 2012 at 12:37 am

If “conspicuous consumption” winds down, I expect it to be for a much more practical reason: Those politicians who so desire are beginning to become very successful at inciting class warfare, and when there are mobs of thugs around, driving or even possessing a Ferrari amounts to painting a target on your own forehead.

Manolis January 14, 2012 at 1:18 am

Good point Mr. Galt. What you’re describing has already set in quite nicely in Greece where even ownership of an SUV nowadays is liable to make people look at you funny or even throw epithets like “thief”, “crook” and the like…

GiT January 14, 2012 at 7:20 am

Ownership of an SUV, or a Ferrari, is generally a perfectly good reason for someone to be sneered at and insulted. It’s a pity it doesn’t happen more often.

Manolis January 14, 2012 at 8:16 am

Choosing not to partake is one thing (I happen to agree-at least when it comes to SUVs…). Insulting, or even worse, encouraging the widespread insulting of people who don’t agree with your taste is quite another. Last time humanity tried to “curate” taste for everyone it didn’t work out so well.

Oh I forget-we still have the DPRK to be proud of…

NAME REDACTED January 14, 2012 at 9:47 am

SUVs would be uncommon if the US hadn’t of banned effective station wagons. (SUVs are an example of regulatory arbitrage.)

GiT January 14, 2012 at 4:30 pm

If only we were dealing with questions of taste.

sam January 14, 2012 at 1:46 am

I think what is called conspicuous consumption is sometimes not consumption so others see us someway but so we see ourselves in that light, it’s signalling to ourselves that we are that kind of person. As I see the audi I’m about to get in I feel a certain way, I think I would feel like a false do gooder if I was getting into a Prius, but maybe a true do gooder if I was getting into a highly efficient small diesel engined car. For me it’s often comes down to my world view, and how I see the things I buy fitting into that. Our ”conspicuous consumption” might be more about reflecting to us the kind of person we want to be, than trying to show that to others

Manolis January 14, 2012 at 8:17 am

That is very true. That’s why certain people associate so strongly with some brands. (Apple comes to mind)

GiT January 14, 2012 at 4:27 pm

Anecdotal evidence against:

http://www.guardian.co.uk/film/2012/jan/14/golden-globes-america-food-poverty

“The pudding, decorated with real gold, is described as “a chocolate delice, almond crunch terrine, garnished with acacia honey, caramel and fresh berries” and sprinkled with edible gold flakes at $135 a gram. The dish was devised over six months by pastry chef Thomas Henzi at the Beverly Hilton hotel and is being prepared by 40 chefs and 110 kitchen staff.

“There is gold dust on there for the Golden Globes,” Henzi has explained, adding it would pair ideally with the Moët & Chandon Grand Vintage 2002 magnums created for the night. The meal will be served to 1,300 guests, including awards presenters Nicole Kidman, Natalie Portman and Frieda Pinto.”

Mr. Lynch January 14, 2012 at 6:30 pm

Methinks there is an element of fashion, here. Who wants to be mistaken for a one-percenter and then “occupied”?
(I say this as a “five-percenter”).
When the economic hysterics die down and it’s no longer uncool to be rich, the luxury goods markets will probably rise.

Pragmatist January 15, 2012 at 1:23 pm

Yes. We’ve already seen the dawn of the Age of Conspicuous Thrift: http://sdj-pragmatist.blogspot.com/2009/01/age-of-conspicuous-thrift.html

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