Conspicuous Consumption

"The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries."
Winston Churchill

"Any man who is under 30, and is not a liberal, has not heart; and any man who is over 30, and is not a conservative, has no brains."
Winston Churchill

"Thereís no free lunch. Donít feel entitled to anything you donít sweat and struggle for."  
Marian Wright Edelman

"I would like to electrocute everyone who uses the word 'fair' in connection with income tax policies."
William F. Buckley


Anyone who has taken the time to look at very much of this web site will have reached the conclusion that we practice conspicuous consumption. We have been blessed with much success in our lives, and have chosen to return some portion of that to the economy in the form of numerous large purchases. Some well meaning souls, or perhaps not so well meaning but envious to a fault souls, may question whether this is really doing "our part" for society. After all, if we've been so fortunate, don't we owe it to the less fortunate to do something about their plight?

I have always found these sorts of discussions to be terribly painful. I reject the notion that there is some debt that the more fortunate have to pay, or some moral obligation. For one thing, despite the fact that we've loaded the language by even referring to it as "fortune", most wealth is not entirely a matter of luck or even treachery. It takes hard work, native talent, and yes luck will be a factor in determining the timing, but I think not in determining whether wealth is attainable at all in this country. Edison was right about the ratio of perspiration to inspiration--it applies to wealth as much as invention. In this area, I am a total convert to Ayn Rand's Objectivism. The essence of Democracy, Capitalism, and any other Darwinian process is that many individuals acting with enlightened self interest will create the greatest good. Virtually every time we deviate from these ideals in any major way we wind up doing less good.

Now if we set aside the issue of moral obligation, and just deal with the system as it works today, we find that already the privileged (another word calculated to encourage war between the haves and have-nots) are called on for more than their "fair" share due to the progressive income tax system. Let's set that argument aside too, and just live with a progressive tax. I don't believe its fair, but I'll save that diatribe for later.

Let us simply ask, "By what means of deployment of wealth can the most good be done for others?"

I see several possibilities. Obviously one could give to charity. One could invest the money. One could use it to start a business, which I differentiate from investment for some important reasons I'll give in a moment. Finally, one could use it to buy lots of goods and services. I believe that for these options, the hierarchy of "goodness done" looks something like this:

Buy goods, aka Conspicuous Consumption. Most goodness done.

Start a business.

Invest.

Give to charity. Least goodness done.

How do I come by this judgment? Let me explain. The most goodness done is by increasing the wealth for as many as possible. In some sense, the metric is how much do my efforts increase our gross national product. Perhaps you feel this is not a measure of good at all, but I must differ with you on that if so. It is far too highly correllated with standard of living or virtually any other measure of good you may wish to introduce. Since it makes my arguments on this matter much easier to understand, I'm sticking with it for purposes of this essay. Once see where I'm going, I think you'll find most objective metrics are amenable to similar argument and that it isn't a bad metric at all. So let's consider each use of wealth and its impact on goodness.

If I buy goods, I increase the wealth of the businesses and individuals who are selling the goods. Perhaps a car factory produces one more car than it otherwise would have. When you add up the value of all the goods I purchase through my conspicuous consumption, it amounts to a significant amount of capital injected directly back into the economy and used to pay a whole bunch of folks who helped make or sell the goods. These folks, in turn, will hopefully use that wealth to do still more good, creating a cycle of virtuous feedback. Of all the things I list, buying goods is really the only thing that increases economic activity so directly, and therefore allows the economy to grow in real terms.

If I start a business, I'm creating jobs that increase the wealth of those individuals. It may increase my wealth, so that I can then return that wealth through one of these mechanisms. It may increase the wealth of others occupying adjacent parts of the economy. For example, if I manufacture a popular product, the stores that sell the product will create wealth and perhaps jobs. For the most part, we can regard starting a business as increasing supply in some macro sense. If we simply increase supply, typically what happens is prices fall and we haven't necessarily done a net good unless there is sufficient elasticity to increase demand out of proportion, or unless the lower prices allow redeployment of funds to some other worthwhile sector, in effect increasing demand. Buying goods and directly increasing demand is therefore more desirable.

If I invest, my capital may be used by others to start or grow a business. I will argue that this is somewhat less desireable than either starting the business ourselves, or better, stimulating another business by increasing demand through purchasing their goods. Capital by itself, at least the way I invest in the stock market, doesn't really increase demand very much, though admittedly it does to some extent. I would submit that the economy would be better served if Warren Buffet would get over a little of his tight fistedness and buy a new car every year. I don't advocate he blow up all of his billions on excesses like the Sultan of Brunei--his unique investing talents may mean that he is a person who efficiently allocates capital in the free market economy, and because he is so much better at it than average he should be left to do that. I, on the other hand, am not Warren Buffet. Society is better off if I squander my wealth on toys!

Which brings us to charity. Why is this the least desireable way to do goodness? Because it increases the wealth of individuals who are in the worst position to turn around and re-inject that wealth back into the economy. It creates the least demand and does nothing about increasing supply. For the most part, these institutions are a dead weight on the economy in fact. Nevertheless, even if not a single dime got back into the economy from them, and that is far from the truth, there is still merit in giving to charity. Some things simply will not be accomplished except by charities. All I am saying is that this is not how the greatest goodness can be done. The old saying about giving a man a fish versus teach him to fish was never more true than for this case.

Because I am not a completely insensitive person, I will continue my pattern of conspicuous consumption wherever possible. I say this with tongue firmly in cheek, but ironically, when we look at the aftermath of 911, the thing we are being urged to do above all else to help the economy is, guess what, "Spend more money!" We all know it is the right thing to do in this case, so why not consider the possibility that its always the right thing to do?

 
All material © 2001-2006, Robert W. Warfield.