Luxury Fever

I'll start discussing Geoffrey Miller's new book Spent soon.  But first let me review its main predecessor: Robert Frank's book Luxury Fever, from 2000. Miller on Frank:

I owe Gad Saad and Robert Frank a great debt for their groundbreaking work. … Frank's reasoning, like mine, is that many purchases function as positional goods that display one's wealth, status, or personality traits rather than yielding true happiness benefits or fitness payoffs to the purchaser. … All my arguments are highly supportive of Robert Frank's proposal for a progressive consumption tax. (p27,312)

Frank begins Luxury Fever complaining about $5000 barbecue grills, whose main purpose he presumes is to show off how much money its owners can spend.  Frank wants to discourage "conspicuous" rather than "inconspicuous" consumption: 

If we all lived in smaller houses, or drove less expensive cars, we could all take more weeks of vacation each year. … Vacations offer the opportunity to see new places, visit with distant relatives and friends, take up a new sport, read books, lie on a beach, hike in the wilderness. ….

The degree to which workers enjoy autonomy and choice with respect to which tasks they do and the manner in which they perform them. … Workers tend to find greater satisfaction in jobs that provide greater opportunities to make use of their skills. … Job satisfaction increases with the variety of tasks workers are called on to perform. … If pay were the same, people would choose safe jobs over risky ones, quiet jobs over noisy ones; jobs with convenient parking over those without; jobs with security over those without; and so on.

What … I call "inconspicuous consumption" – freedom from traffic congestion, time with family and friends, vacation time, and a variety of favorable job characteristics.  In each of the examples discussed, the evidence suggests that subjective well-being will be higher in the society with a greater balance of inconspicuous consumption. 

The list of inconspicuous consumption items could be extended considerably.  For instance, we could ask whether all living in slightly smaller houses would be a a reasonable price to pay for higher air quality, more urban parkland, for cleaner drinking water, for a reduction in violent crime, or for medical research that would reduce premature death. … Rapid transit to alleviate traffic congestion … Spending additional time with family and friends. … A given sum can be spend to make a car faster and more luxurious, or to make it safer and more reliable.  (pp86-92)

Frank is correct that if we do some things more for show, to make us look good relative to other people, and if we do other things for more absolute gains, we might indeed be better off with a global tax on the showy activities.  Yes there may be some efficiency gains from status sorting, but we probably do work too hard for relative status gains. 

But, Frank seems completely blind to the fact that most of the "inconspicuous" activities he likes are also visible and status-determining, just as the "conspicuous" activities he dislikes.  We only see those fancy grills when visiting friends and relatives, as Frank recommends, at which time we commonly mention or show, and are judged by, our job task variety, vacations, commutes, crime risk, auto safety, and water purity. 

Strikingly, Frank offers no evidence whatsoever that the activities he dislikes and wants to tax in fact cause more inefficient status-seeking than the activities he likes and wants to subsidize.  It doesn't even seem to occur to him that such evidence might be requested.  A cynic might suspect that he and his supporters mainly just want to raise their status by discouraging status signals in areas where they do worse, and encouraging status signals in areas where they do better.  At that summer barbecue, maybe Frank would rather we all sat transfixed by his articulate lecture on the politics of status, without being distracted by the host's shiny new grill. 

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