Conspicuous Consumption

Brad DeLong has a blog post that borders on a meditation on the nature of class triggered by a New York Times article that presents a seemingly paradoxical turn of events -- class mobility, something we've always prided ourselves on in America, has decreased. But at the same time, the ability of even our poor to consume what would be considered luxury goods in previous years have never been higher. So, if our standard of living is accelerating at such a dizzying rate, why should we liberals be harping on so damn much about equality? If the pie is growing fast enough for everybody to be getting more, why should we be concerned that the way it is being divided is increasingly inequitable? I think Brad come close to nailing the problem here.

it is a mistake to say that the shop-girl of today has the same standard of living as a duchess of a century ago because the key element of being a duchess is being exceptional. To the extent that goods are valued not for the services they provide by themselves but as indices of exclusivity, it is pointless to produce them for more people because then they become less exclusive and so less valuable.

Or to take another example -- wampum, or coins painstakingly made from polished conch shells, was considered valuable by Native Americans and used as currency. Can you argue that James and David Campbell made them better off by inventing the wampum machine? No. By taking away the high costs associated with making wampum, they destroyed its value.

All acts of conspicuous consumption is affected by the wampum effect. This is what George Orwell was talking about in Road To Wigan Pier when he scathingly observed that the working class has been "compensated... by cheap luxuries which mitigate the surface of life." That is, they are like Native Americans right after the invention of the wampum machine, accepting what is no longer valuable for coinage.

Does this mean that I don't believe in the enormous increase in welfare that has come from economic progress? No. That would be silly. Getting enough food to eat...advances in healthcare...those gains are real. What I am saying is to beware of taking the proliferation of baubles as a sign that everybody in America is making economic progress. I purchased a cellphone six months ago for $50 that Bill Gates himself could not have bought for a million dollars 6 years ago. Does that mean I'm better off than Bill-6-years-ago?