the arms-race nature of consumption

several articles caught my eye on this black friday 2007:

one of the first things i read this morning was this:

On receiving a paypacket, how good a man feels depends on how much his colleague earns in comparison, scientists say. Scans reveal that being paid more than a co-worker stimulates the “reward centre” in the male brain.Traditional economic theory assumes the only important factor is the absolute size of the reward. But researchers in the journal Science have shown the relative size of one’s earnings play a major role.

later, i noticed that greg mankiw had picked up on the study and linked back to an earlier post related to the subject, “Are the rich a form of pollution?”:

In Brad’s world, a rich person conveys a type of negative externality, like pollution. High taxes on the rich can be seen as Pigovian. Economists like me complain that high tax rates on high earners discourage their hard work and entrepreneurship. The Veblenesque Pigovian economist replies, “Precisely!”

I must confess that I do not have a good retort to the argument. This is all the more problematic because there is some evidence that having rich neighbors reduces a person’s self-reported happiness. (See Luttmer and Weinzierl.) But I am uncomfortable making envy a basis for public policy.

i then read about positional goods and  veblen goods:

It is claimed that some types of high-status goods, such as expensive wines or perfumes, are Veblen goods, in that decreasing their prices decreases people’s preference for buying them because they are no longer perceived as exclusive or high status products. Similarly, a price increase may increase that high status and perception of exclusivity, thereby making the good further preferable. The Veblen effect is named after the economist Thorstein Veblen, who first pointed out the concepts of conspicuous consumption and status-seeking.^[1]

(that wiki article on conspicuous consumption was worth a read as well).

it was difficult today to avoid reading something about buy nothing day, “a 24-hour moratorium on consumer spending – participate by not participating”. kalle lasn, one of the organizers, argues:

“The world’s scientists and the UN are telling us that we may be in for a series of abrupt and irreversible climate catastrophes,” he notes, “The onus is on us, the one billion most affluent people on the planet – the upper 20% that consumes 80% of the world’s resources – to rise to the occasion with an abrupt change in our lifestyles.”

“We have to not just start buying green, but start buying less. We can start by refusing to participate in the consumer frenzy this Friday and during the upcoming holiday season.”

it was also difficult to not see the point of detractors who “charge that Buy Nothing Day simply causes participants to buy the next day”.

i suppose in order to make an actual argument to tie these things together here, i would need to be a lot more educated on economic issues and put a ton of work into a thesis. so i will just forego any pretense of thoroughness and deliver an armchair-quarterback opinion that maybe a consumption-based tax, rather than a higher income tax on wealthier people, would help address some of these problems in a more sustainable way (if these are indeed problems, and my observation is they are).  [i apologize for using “sustainable”, which i feel is getting to be a severely overused word.]