A few months ago, my trusty old Seiko died and I found myself in the market for a new watch. I ended up buying a 
1,000, 
10,000 on a watch that does nothing more than my $100 Seiko?
The answer, of course, is status. Thorstein Veblen got it right in his classic Theory of the Leisure Class:
Conspicuous consumption of valuable goods is a means of reputability to the gentleman of leisure.
And:
Since the consumption of these more excellent goods is an evidence of wealth, it becomes honorific; and conversely, the failure to consume in due quantity and quality becomes a mark of inferiority and demerit.
This leads to the perverse phenomenon of the “Veblen good”: a good for which demand increases as the price increases, because the high price is essential to the item’s exclusivity, and exclusivity begets status. Luxury brands need to maintain their high prices, lest the hoi polloi begin to partake. Louis Vuitton is learning this the hard way in China:
Still, brands that become too accessible are less appealing to superrich buyers. Louis Vuitton, for instance, is considered a “brand for secretaries” by many wealthy Chinese.
“Louis Vuitton has become too ordinary,” a billionaire woman told China Market Research Group managing director Shaun Rein in 2011. “Everyone has it. You see it in every restaurant in Beijing. I prefer Chanel or Bottega Veneta now. They are more exclusive.”
That same article includes this “pyramid of luxury brands” (click to enlarge):
Granting that status has some value, I still have to ask: is it worth it? Does the cachet of wearing a Patek Philippe justify the price?
Good grief, phoodoo.
Have you never in your sheltered life heard the phrase “keeping up with the Joneses”?
Do you think I just invented the idea of conspicuous consumption?
petrushka,
Don’t you think that statement is a bit… sweeping?
Another thing Phoodoo doesn’t get, despite quite explicit examples at the start.
Try the divine communication thread Phoodoo, you’ll get to use your creativity …
phoodoo,
“I deal with some of the richest people in the world. They are artists, entertainers, eccentrics. Some of them have watches that cost as much as some people’s house. But if you looked at their watch, you wouldn’t know the first thing about what it is, or what it costs. They don’t care if you know how much their watch cost. In fact they are quite happy for you not to know the value of their watch. They didn’t buy it to show you are anyone else what it cost. They are quite happy for you to not know how much anything they own costs. You little theory that they are doing it for status is absolutely wrong.”
phoodoo, how do you know that “Some of them have watches that cost as much as some people’s house.”?
For phoodoo:
Back around 1955 my father weng to Switzerland on business. He brought back watches for everyone. For my older brother –abought to graduate from high school — he brought a Rolex Tudor. I was told it cost about $50. That was a lot of money then, but a fraction of what a Rolex would cost, even then. And the case was very ordinary.
But it had the five tiny dots on the stem. My brother said when he got to college, strangers would spot his Rolex and ask about it. It did not look like anything I would recognize as a Rolex, and it didn’t say Rolex, but members of the club knew. They live for this stuff.
Same way phoodoo knows evilution is nonsense.
petrushka,
Yes, some people know some things about watches that the average person would be unaware. I know about watches.
Ever considered that other people, experts in their field, might know things that you do not in the same way?
Would you like somebody who knows nothing about the bible except what other people have told them critiquing your religion? Would you accept that criticism as valid?
Yet you expect to be able to do that and be lauded for it. One rule for you eh? What’s the word for that sort of person, hmm, let me think….
keiths,
Bill Gates collects Porsches. He owns a 959 that costs around half a million dollars, and wasn’t even street legal when he got it. Do you think he bought it for status?
OMagain,
Anyone can know about watches if they are interested. Likewise for (the lack of) evolution.
So people just don’t want to know.
Of course he did. If he hadn’t bought it for status, you wouldn’t know about it.
Status doesn’t have to involve parading in public. On can enjoy status in private, such as having a privately prepared meal. But if you are Bill Gates, you remember when you couldn’t afford it, and your ability to afford it affects the way you interact with other people.
Has HIV evolved? Or not? Support your answer either way.
OMagain,
Nope, its still HIV.
Know nothing Phoodoo:
http://evolution.berkeley.edu/evolibrary/news/081101_hivorigins
Richardthughes,
“HIV’s evolution is particularly rapid because of its high mutation rate — up to a million times faster than our own.”
So, I guess with that rapid mutation rate, it should be turning into a new life form any day now….will waiting.
Selection? Know-nothing. Nice watch though.
Richardthughes,
Selection is going to make all those mutations turn into a new life form? When?
How will that work exactly?
HGT is more likely IMHO
Phoodoo, define new life form.
A new life form is that thing that Darwinists say form when you get enough mutations to an existing form to produce evolution.
Its sort of like a fairy tale, the fairy tale called Darwinian evolution.
What utter gibberish. Have you ever read a book on evolution?
I’m starting to get an idea of what the rich and famous must use you for.
phoodoo:
phoodoo,
See if you can spot the logic error:
K: Most birds fly.
P: You’re wrong! Penguins don’t fly!
A relevant paper:
Income Inequality and Status Seeking:
Searching for Positional Goods in Unequal U.S. States
Lukasz Walasek
Gordon D. A. Brown
University of Warwick
Abstract
It is well established that income inequality is associated with lower societal well-being, but the psychosocial causes of this relationship are poorly understood. A social-rank hypothesis predicts that members of unequal societies are likely to devote more of their resources to status-seeking behaviors such as acquiring positional goods. We used Google Correlate to find search terms that correlated with our measure of income inequality, and we controlled for income and other socioeconomic factors. We found that of the 40 search terms used more frequently in states with greater income inequality, more than 70% were classified as referring to status goods (e.g., designer brands, expensive jewelry, and luxury clothing). In contrast, 0% of the 40 search terms used more frequently in states with less income inequality were classified as referring to status goods. Finally, we showed how residual-based analysis offers a new methodology for using Google Correlate to provide insights into societal attitudes and motivations while avoiding confounds and high risks of spurious correlations.
[Emphasis added]
From the Federal Reserve Board:
Signaling Status: The Impact of Relative Income on Household
Consumption and Financial Decisions
IV. Conclusions
This paper has investigated the importance of the status concerns in the consumption and financial decisions of households. Using the SCF linked with Census tract information from the ACS, we find evidence that a household’s income rank relative to its close neighbors—those in the same census tract—is positively associated with the decision to buy a high status car. After controlling for income itself, as well as a number of other demographic and economic variables, income rank is also positively associated with credit usage, including credit card balances, the decision to file for bankruptcy, and riskier portfolios. The aggregate county-level evidence also appears consistent with the signaling hypothesis. Income inequality at the county-level is positively associated with both the fraction of high status cars bought in the county, and indicators of consumer leverage. These results suggest the signaling motive might feature in some durable goods consumption choices, as households seek to “get ahead of the Joneses”, and invest in status consumption goods to signal that they might have advanced in their relative income position. These findings also suggest that rising inequality might have broader macroeconomic consequences, including a reduced savings rate and greater household debt.
And:
Conspicuous consumption and income inequality in an emerging economy: evidence from India
Saravana Jaikumar,
Ankur Sarin
Abstract
The impact of income inequality on conspicuous consumption has been a topic of much discussion, but little empirical examination in the emerging market context. In this paper, using data from the India Human Development Survey (2004–2005) and employing simple regression framework, we examine the effect of income inequality on conspicuous consumption in Indian households. We also empirically examine whether the relationship between inequality and conspicuous consumption changes with a household’s relative wealth status. Drawing on existing literature, we hypothesize that low-income and rural groups are likely to engage in higher conspicuous consumption due to the reduced attractiveness of alternate mechanisms to signal status (like professional titles and educational qualifications) as well as the absence of well-functioning financial institutions that might inhibit “status seeking” savings. Consistent with this hypothesis, our results suggest that increased income inequality is associated with an increased spending on conspicuous consumption as a share of total spending, with the associated response being higher for relatively low-income households and those living in rural settings. Our findings have significant policy and marketing implications in emerging markets like India.
Of course, these papers are really just evidence of an international Darwinist conspiracy to fabricate data and make phoodoo look foolish. 🙂
keiths,
Richer people buy more expensive things. You are just beginning to figure this out. Congratulations on your insight breakthrough.
Finally we know why you didn’t buy a $2 watch.
Another phoodoo flameout.
Show us that conspicuous consumption is just a myth, big guy.
keiths,
The only reason you bought a
2 watch is because of your need for conspicuous consumption-I agree.
But not everyone is you.
The ultimate Veblen good.
keiths,
This has got to be one of the funniest psychology papers I have heard mention in a while (though admittedly there are a lot of nonsense papers in these journals).
“70% of the search terms in states with higher income equality were for luxury goods. 0% of the search terms in states with lower income inequality were for luxury goods. ” 70% to 0! Haha, yea right!
Keiths, when you see such a ludicrous result as this, you might want to use just a tiny, eeny weeny bit of skepticism in your thinking. I realize as a “skeptic”, that is contrary to your methodology, but maybe try it once.
phoodoo,
You haven’t learned when to cut your losses, have you?
Everyone (but you, apparently) knows that ‘keeping up with the Joneses’ is a real phenomenon. We have first-hand accounts and plenty of studies. Almost everyone knows (or is) someone who participates in conspicuous consumption of one kind or another.
You even admitted that it happens:
Um, yes it does.
You got it completely wrong — again.
phoodoo,
Ah, you know about watches, eh? But you said:
“But if you looked at their watch, you wouldn’t know the first thing about what it is, or what it costs.”
So, if “you” (whoever that is) looked at their watch, “you” (whoever that is) “wouldn’t know the first thing about what it is, or what it costs.” By “you”, do you mean anyone/everyone (which would include you) or do you just mean Keith? If you just mean Keith, how do you know that Keith doesn’t “know about watches” and “wouldn’t know the first thing about what it is, or what it costs”.? If by “you” you mean anyone/everyone, how do you know that anyone/everyone “wouldn’t know the first thing about what it is, or what it costs”?
Are you the only person on Earth who knows what a watch is and what it costs by looking at it while it’s on someone else’s wrist?
phoodoo,
“I happen to own a very expensive watch (100 times more than your Seiko), and I also give to charity.”
Well then, it’s obvious that you’re not one of the people who don’t care if other people know what your watch cost ($10,000). Just think of how much more you could give to charity if you sold your watch. You’d have a chance of getting into heaven too.
“It is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God.”
“Jesus said to him, If you wish to be complete, go and sell your possessions and give to the poor, and you will have treasure in heaven; and come, follow Me.”
phoodoo, you DO believe in heaven and you DO want to go there, don’t you?! Please tell me that you believe in heaven! Egad, I’d hate to think that you don’t believe in heaven! You DO want to be perfect in heaven and have treasure there, don’t you?! You don’t want to go to hell for eternity, do you?! And you DO want to follow jesus, don’t you?!
phoodoo,
“So, I guess with that rapid mutation rate, it should be turning into a new life form any day now….will waiting.”
Yeah, any day now HIV will evolve into a Crocoduck. Something like that is what you expect, isn’t it?
Tell me, phoodoo, was HIV created by your chosen, so-called ‘God’ in the beginning?
Richardthughes,
Richard asked phoodoo: “Have you ever read a book on evolution?”
Nah, he’s too busy fondling his $10,000 watch and being a willfully ignorant, pretentious jerk.
But he’s very good at it.
keiths,
Wait, you mean the point of your post was to say that some people buy expensive things to show off? gee, if that is all you wanted to say, you could have just stopped right there and I would be happy to agree with you. Some people buy expensive things to show off.
But since you already have agreed that Bill gates doesn’t buy Porsches to show off, then we know now there are other reasons for buying an expensive watch besides showing off (like because the buyer likes it).
Just like you bought a more expensive watch than you needed to get the job done, because you like it.
C’mon guys! What would Lizzie say?
phoodoo,
My point in this thread is to discuss expensive watches and other Veblen goods. The thread title is sort of a clue.
Have you figured out your point yet?
Lizzie would wear a Seiko.
My kids haven’t worn a watch in years. The time is on the phone, and it’s always right. Watches are for dorks. Appointment reminders, also on the phone.
Now you can spend kilobucks on an Apple Watch.
I happen to have an orthogonal view of all this. I despise waste and throwaway stuff. I think expensive stuff minimizes waste, because it tends to be handed on to other people rather than being thrown away. It also employs skilled labor to manufacture , and another tier of skilled labor to maintain.
See also Commander Vimes’ boots.
“Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.
But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that’d still be keeping his feet dry in ten years’ time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.”
— Terry Pratchett
It’s the exact opposite of comspicuous consumption. The goods are not “consumed” at all: expensive boots meant to last nearly a lifetime, or a watch not only meant to last but to be handed down, aren’t “consumed”. So they’re poor examples for this thread re Veblen.
But having enough money, above the need for immediate food and shelter, to buy an expensive pair of boots, no matter how practical they will be in the long run … that’s status. Maybe not status with a capital S, but status nonetheless.
hotshoe:
Conspicuous consumption isn’t limited to things that are “used up”. This 90,000 square foot mansion will last (unfortunately) for generations, but it is definitely an example of conspicuous consumption.
Bill Gates could always afford it. He didn’t lift himself up by his own bootstraps.
I was tempted to want to read the entire article Keiths posted here just for a laugh, but that would clearly be the biggest waste of money one could imagine. What a crock of shit this is.
The notion that you could first divide the states by income equality in some meaningful way, and then look at their google search patterns from those states (what was their threshold for income inequality percentages?) and find those states (surprise) had a TOTALLY different pattern of using the internet!! This should be a giant headline on the front of the New York Times!
Residents in the “unequal” states sit around all day looking at luxury goods, while those in the “fair” states can’t be bothered with the trappings of decadence! What a revelation. And its 70% of the searches compared to 0%!!! Can you believe it?? There is a utopian dream in America, if ONLY we knew which states those were!
Well, I guess if you are keiths you can. Hohoho…aren’t scientific studies fun!
Keiths can you start a new thread to show just how amazing this study is? Can we get the major media outlets to pick this up? Where is this Shangri-La? Please help your brothers.
phoodoo,
Can you name one flaw in the study? All I see in your comment above is a lot of hyperventilation.
keiths,
Well, I am surely not going to buy the study, that would be a tremendous display of unnecessary conspicuous consumption, but here is what I can find out so far:
In places like Utah and Hawaii (low income inequality) , they have little interest in designer ski bibs and ruby studded cowboy boots, they mostly want to know about canning techniques online (that is not a luxury, right?), whilst in places like Louisiana and Alabama, where they have high income inequality, it seems that all they do all day is sit around dreaming about getting gold Gucci slippers for their babies, and deciding what shade of pink will look best in their Aston Martins.
I wonder if you are searching for the best horse feed in Florida, is that considered a luxury item, but if you are searching for the most expensive saddle wax while you live in Montana, is that an example of your pursuit for a simple life instead of the good life?
Keiths,
I am just thinking, maybe the reason they have such high income inequality in places like Tennessee and Missippi is because so many people there are just sitting around all day looking at Tiffany crystal and Hermes scarves online whereas in Hawaii they don’t care about Lamborghinis and caviar, they just want everyone to hang ten, work hard together and share their Pabst Blue Ribbon at night (not a luxury item, right?)?
This gives me an idea! Maybe I should open a Bentley customizing shop in Knoxville?