Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Saturday, September 09, 2006

Air Cover on Veblen Effects from Daniel Davies and Lizard Breath

I wrote some things that I thought had been obvious and uncontrovertible since pointed out by Thorstein Veblen:

Brad DeLong's Semi-Daily Journal: Making 'em Feel Small...: I wrote that one reason that America's rich today live the expensive and ostentatious lifestyles they do (rather than spending much more money on charity, or philanthropy) is that it is a way of making other people feel small and unhappy:

Brad DeLong's Semi-Daily Journal: Lyndon Johnson, Yes. William Jennings Bryan, No.: I'm enough of a touchy-feely sociology-lover to believe that a good chunk of the utility the rich derive from their conspicuous consumption is transferred to them from the poor...

And promptly found myself in need of aircover. Now additional aircover arrives:

From Daniel Davies, who writes:

D-squared Digest -- FOR bigger pies and shorter hours and AGAINST more or less everything else: Thursday, September 07, 2006: No Riff-Raff

Entering into the Brad DeLong Eat The Rich Controversy, I offer this observation:

If it is not the case "that the rich are spiteful--that they enjoy the envy of the poor", then why is the word "exclusive" so popular in the marketing material for hotels, nightclubs, holiday resorts and residential property developments.

"Exclusive" is probably these days an advertising man's synonym for "nice", but it also has a clear and specific literal meaning. It means that the hotel, nightclub, resort etc is providing a bundled service; partly, the provision of a normal hotel or nightclub, and partly the service of excluding a segment of the population from that service. One pays extra to go to a health club whose swimming pool is not polluted by the greasy, hairy polloi.

The reason that this service is valuable is that those who consume it get utility from a) dividing society into two groups, rich and poor, b) creating institutions which physically and socially segregate these two groups and c) them being in the "rich" group.

Nobody would apply for membership of Bouji's or the Bucks if it was just a matter of waiting your turn and paying your fee. This would completely defeat the point of the exercise and destroy the value proposition. The point is that in order to attract a better class of customer, you have to keep the riff-raff out. Basil Fawlty understood this; why doesn't the blogosphere?

And from Lizard Breath, who writes:

I'm not DeLong (and am also not, insofar as I understand what I'm talking about, a utilitarian), but given that he probably doesn't hang around here hitting refresh as often as I do, let me give it a stab, or at least see if I can try once again to clearly convey what I thought was wrong with the critiques of DeLong's post.

While I'm not a strict utilitarian, I think that part of what policy makers should be doing is trying to increase total utility, within the bounds of practicality and justice. DeLong's original post asserted that the rich derive some utility from the fact of inequality -- you could argue with that as a fact claim, but I don't think it's unlikely. And then, by advocating a reduction in inequality that tangibly benefits poorer people, he implicitly suggested that the type of utility that the rich derive from the fact of inequality is not utility that he thinks should be valued from a policy point of view.

That all seems entirely unobjectionable to me.

It is peculiar. I was sitting there, having nice utilitarian-technocratic thoughts about American economic policy, writing things like "I'm enough of a believer in CPI bias to want to say 'real compensation for male nonsupervisory workers has stagnated since 1973'--I think it has grown, but only very slowly, and much less rapidly than productivity. On the other hand, I'm enough of a touchy-feely sociology-lover to believe that a good chunk of the utility the rich derive from their conspicuous consumption is transferred to them from the poor: the happiness America's working poor and middle class derive from the compensation distribution--given their compensation, the compensation of the rich, and the lifestyles of the rich and famous--seems to me to be certainly less than that of their counterparts back in 1973."

And Greg Mankiw decides that he wants to change things from a utilitarian-technocratic discussion about social welfare among various states of affairs to a discourse about the moral flaws of the poor: "I am uncomfortable making envy a basis for public policy."

To which I respond by focusing on the moral flaws of the rich: "It's not the hard work and entrepreneurship [of the rich] that is to be discouraged. Make inventions, build enterprises, donate money for hospitals and libraries--that is all extremely meritorious and praiseworthy. It's the conspicuous consumption that is the problem. Surely spite is at least as offensive an other-regarding preference as envy, isn't it?"

And then all of a sudden we are accused of wanting to throw acid in Cindy Crawford's face.

It's been a long, strange trip.


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