Conspicuous Consuption

Conspicuous consumption is probably one of the most damaging aspects of American society. It involves using our purchases to serve as a way to show off a particular aspect of who we are want to be. As Kevin Simler and Robin Hanson write in their book The Elephant in the Brain, “the idea that we use purchases to flaunt our wealth is known as conspicuous consumption. It’s an accusation that we buy things not so much for purely personal enjoyment as for showing off or keeping up with the Joneses.”

 

Throughout the book Hanson and Simler look at human behaviors and consider them alongside the stated reasons, beliefs, and excuses that people have for those behaviors. There are many things in life that we do without acknowledging ulterior motives. We have motivations that lie beneath the surface and drive our thoughts, feelings, and opinions. We do not examine and acknowledge these motivations, but they are real, and they are there.

 

Conspicuous consumption is the use of our wealth and ability to make purchases in a way that is ostensibly about one thing, but very likely are about something else that we would like to keep hidden from others. When we buy a fancy new sports car, we will tell others about incredible new technology, about how hard we have worked and how we deserve to treat ourselves, or about the incredible performance of the car. What we likely won’t tell people is that we felt that we deserved more attention and wanted to show off that could afford a new sports car. What we won’t acknowledge, even to ourselves, is how much our behavior is driven by others and by a desire to fit in, be praised, and make sure everyone is aware of our beliefs about our personal value.

 

Each of those things (showing how much we fit in, telling people how valuable we are, and receiving praise) are aspects of social life that we can’t just go around and obtain directly. Instead, we have to signal those things through behaviors and activities that we can spin as more sociable and more acceptable behaviors. Money and wealth gives us a chance to show off and to signal our competence or connectedness to the outside world. It gives us a way to brag without having to outright brag. We can be more humble in the ways that we show off by being indirect.

 

However conspicuous consumption can drive us to ignore climate change and the externalities of our actions. It can create stress as we strive to make purchases that put us in perilous financial situations – the opposite of what the purchase is supposed to signal. And it is ultimately all about gaining more status at the expense of others who cannot keep up. We spend a lot of time and energy attempting to show off our wealth so that we can be rewarded not by the thing we purchase, but with praise and respect of others that we may not really deserve. We should acknowledge these pressures and chose when we are going  to be conspicuous with our wealth, and when we will exit the signaling contest avoid showing off.

The Purchases We Make

In their book The Elephant in the Brain, Kevin Simler and Robin Hanson write about “conspicuous consumption,” a term coined by economist and sociologist Thorstein Veblen who lived about 100 years ago. Simler and Hanson write, “When consumers are asked why they bought an expensive watch or high-end handbag, they often cite material factors like comfort, aesthetics, and functionality. But Veblen argued that, in fact, the demand for luxury goods is driven largely by a social motive: flaunting one’s wealth.”

 

The other pieces of the argument, the good performance of the item, the colors we were dying to have, and the durability of the product might be true sometimes, and that allows us to make those excuses even though they only describe part of our purchase. A big part of Hanson and Simler’s book focuses on the idea that we use these excuses that sometimes are true or that partially describe our decisions to justify actions that signal something other than the stated reason for our action.

 

In the case of buying luxury goods the thing we are signaling is our wealth, which demonstrates our financial resources and can be used as a proxy for our social capital and human value. Our wealth may give others insights into our skills and abilities to do hard things, helping us stand out against a crowd. Our wealth may reveal our deep social connections or our family’s high status, two traits that certainly helped our ancestors pass their genes along in a small political tribe.

 

The problem today, however, is that we don’t admit this is what we are doing with our purchases, and as a result we have trouble addressing major externalities from our consumptive habits. We spend a lot of money on unnecessary luxury goods, and many people go deeply into debt to signal that they are the type of person who would own a certain type of luxury good. Our unyielding desire in the United States for ever further and greater consumption leads us to buy larger houses that we have to heat, faster cars that use more energy, and to own more clothes that will take millions of years to break down thanks to the new synthetic fibers we make them from. Our consumption and our drive to continuously signal our wealth and social value, some would argue, is poisoning and heating our planet to dangerous levels.

 

Simler and Hanson don’t focus on the externalities of our signaling behavior in their book, but they do acknowledge that they are there. In the book, the authors make an argument that most of us would rather ignore. That we do things for selfish motives that we would like to keep under the covers. This is important if you are an economics, sociology, or policy researcher, and for us in our daily lives, we can take a lesson from Hanson and Simler that stems from an awareness of our self-centered behavior. We can think about our signaling behaviors and ask if conspicuous consumption is really worthwhile. We can step back and ask if the ways we signal our wealth help or hurt the planet, and we can start to make decisions with positive externalities and attempt to avoid the negative externalities I mentioned above.

The Purchases We Make

In their book The Elephant in the Brain, Kevin Simler and Robin Hanson write about “conspicuous consumption,” a term coined by economist and sociologist Thorstein Veblen who lived about 100 years ago. Simler and Hanson write, “When consumers are asked why they bought an expensive watch or high-end handbag, they often cite material factors like comfort, aesthetics, and functionality. But Veblen argued that, in fact, the demand for luxury goods is driven largely by a social motive: flaunting one’s wealth.” The other pieces of the argument, the good performance of the item, the colors we were dying to have, and the durability of the product might be the true reason we made a purchase in some instances, and that allows us to make those excuses even though they only describe part of our behavior. A big part of Hanson and Simler’s book focuses on the idea that we use these types of excuses to justify our actions. Further, they argue that our behaviors often signal something about ourselves implicitly that we don’t want to say explicitly.

 

In the case of luxury goods the thing we are signaling is our wealth. Our wealth demonstrates our financial resources and can be used as a proxy for our social capital and human value. Our wealth may give others insights into our skills and abilities to do hard things, helping us stand out against a crowd. And, our wealth may reveal our deep social connections or our family’s high status, two social traits that certainly helped our ancestors pass their genes on in small political tribes.

 

The problem today, however, is that we don’t admit this is what we are doing with our purchases, and as a result we face major negative externalities from our consumptive habits. We spend a lot of money on unnecessary luxury goods, and many people go deeply into debt to signal that they are the type of person who would own a certain type of luxury good. Our unyielding desire in the United States for ever further and greater consumption leads us to buy larger houses that we have to heat, faster cars that use more energy, and to own more clothes that will take millions of years to break down thanks to the new synthetic fibers we use to make them. Our consumption and our drive to continuously signal our wealth and social value, some would argue, is poisoning and heating our planet to dangerous levels.

 

Simler and Hanson don’t focus on the externalities of our signaling behavior in their book, but they do acknowledge that they are there. The authors simply make an argument that most of us would rather ignore. That we do things for selfish motives and reasons we don’t want to talk about. This is important if you are an economics, sociology, or policy researcher because you need to understand what people are really doing when they rally politically or make economic decisions.  For the rest of us, in our daily lives, we can take a lesson from Hanson and Simler that stems from an awareness of our self-centered behavior. We can think about our signaling behaviors and ask if conspicuous consumption is really worthwhile. We can step back and ask if the ways we signal our wealth help or hurt the planet, and we can start to make decisions with positive externalities and attempt to avoid the negative externalities I mentioned above.