Conspicuous Consumption, What Is It Good For?

No, when you buy a Rolex, society is one Rolex richer. A Rolex sitting on a store shelf is nothing. A Rolex that has been bought has furthered the economic cycle of production and consumption. Things have value because people are willing and able to pay for them.

edited 24th Nov '12 9:44:57 PM by Lawyerdude

What we obtain too cheap, we esteem too lightly.

Ah no. Wealth (technically "value") is not created by the production, its created by the demand. It doesnt matter how many cars you make if no one wants them. When someone does want them, society is not one car poorer, it's $25000 richer (because that money is spent on buying other stuff, or like lawyerdude pointed out, is invested by the bank).

rats- ninja'd. And I typed so fast!

edited 24th Nov '12 9:46:29 PM by DeMarquis

When you make a rolex society is one rolex richer.

Again, put it in barter terms. When you trade cars for a rolex, have you made society one rolex richer or four cars richer? Neither, you just traded one thing for another. If you then "consume" those goods by using them to destruction, you have decreased the overall level of wealth in the system.

Like I said, this probably isn't the mainstream view, but it makes a lot more sense to me.

EDIT: Things have value because people want things, but that want does not create value, fulfilling those wants does.

Whether people want things is not nearly as in question as whether they can pay for them (ie whether they have anything to trade for them).

edited 24th Nov '12 9:52:12 PM by Topazan

It makes no sense to me to speak of making society "richer" by producing something that isnt in demand. The only reason you could trade one rolex for four cars is because someone wants both of them. Now, to put it in barter terms, what if you bring to barter something you made, but nobody wants? How is that any form of wealth?f

Edit- obviously the creation of wealth is a cycle, both the demand and the ability to satisfy the demand are necessary steps in the creation of new wealth. But the demand, obviously, drives the process.

edited 24th Nov '12 9:53:06 PM by DeMarquis

Society is wealthier by four cars and one Rolex. There used to be no cars and Rolexes. Now there are many. People turned the raw resources of the Earth and their mental effort into goods and services. I don't see how it is any simpler than that.

Sure, a gold-plated iPod may function no better than one you get from the Apple store. But if you are willing to pay $5,000.00 for one, then you get value out of that. I may not have done the same thing, but it's not my money in the first place.

What we obtain too cheap, we esteem too lightly.

Human wants and needs drive the process, but these are unlimited. Demand as we usually speak of it is more a matter of how much money people have to fulfill their needs. People always want things, they only 'demand' them when they have something of value to trade for them. In other words, when they can produce something.

Yes, there used to be no cars and no rolexes, then someone made them. Then they traded one for the other, and used them both to destruction. I did leave that last part out, but I thought it was implied. If you're speaking of value in terms of the personal satisfaction of the two individuals, then you're right that the exchange increased it.

EDIT: Put it this way: imagine there are only two humans in the world. One of them starts picking berries. The other guy really likes berries, but he's got nothing, so the market value of the berries is zero. Then, the other guy starts picking edible roots. Now suddenly the berries have a value in roots, and the roots have a value in berries. Demand for the berries could not exist until the other guy got some roots to trade.

So, it's true that Rolex made the watch because someone wanted it, but more importantly because that someone had something they want.

EDIT: One last thought before I go to bed. Obviously, some forms of production are more valuable than others. However, this only means that demand can determine what gets produced, not whether or not production occurs. Even The Aloner, who has no other person to demand anything he can make, will produce things for his own use all the way up until the point where he's fulfilled his wants and needs to the best of his ability.

edited 24th Nov '12 11:45:53 PM by Topazan

Supply-side economics doesn't work. We just spent like half a century watching that get proved in the other half of the world.

edited 24th Nov '12 10:10:58 PM by Pykrete

That's not supply side economics.

"Human wants and needs drive the process, but these are unlimited. Demand as we usually speak of it is more a matter of how much money people have to fulfill their needs." I see one source of the confusion now. Economics usually conflates the two. What you arent taking into account, I think, is that capacity to pay depends on previous labor delivered by the consumer. This capacity is never zero, because if the consumer doesn't have enough to pay the price, they can borrow it against future earnings (which they are willing to do because they are competing with other consumers for a limited supply of each specific good). Thus, in the real world, demand sets the price, even in the absence of having the money to pay. In any case, even if demand were simply money to pay with, it would still drive value. Producing an item no one wants still creates zero value.

"If you're speaking of value in terms of the personal satisfaction of the two individuals, then you're right that the exchange increased it."

We are speaking of value that way, and the exchange created it, not increased it.

"One of them starts picking berries. The other guy really likes berries, but he's got nothing, so the market value of the berries is zero."

Sorry, but that makes no sense- no one picks surplus berries in the absence of any demand for them. Why waste the labor? In fact, this is another source of our misunderstanding- I understand that no one produces anything except in anticipation of demand for that item. Demand thus drives production.

"So, it's true that Rolex made the watch because someone wanted it, but more importantly because that someone had something they want." Fine, but that doesnt change our basic point.

"One last thought before I go to bed. Obviously, some forms of production are more valuable than others. However, this only means that demand can determine what gets produced, not whether or not production occurs. Even The Aloner, who has no other person to demand anything he can make, will produce things for his own use all the way up until the point where he's fulfilled his wants and needs to the best of his ability."

He is satisfying his own demand. Technically, though, that isn't an economy, so I dont know if it applies.

Most people consider dick waving to be pleasurable. I'd live in a shack with internet access and be happy, but most people want nice things in their life.

Fight smart, not fair.

Production, or at least the anticipation of future production, has to precede demand. Demand exists, but it determines what gets produced for who, not whether or not production occurs.

You cannot say The Aloner is fulfilling his own demand, because in the absence of trade he doesn't have any in the economic sense. You're right that production of something no one wants is worthless, but if people stop demanding one thing, that doesn't stop you from producing something else. I'm not failing to take into account that capacity to pay depends on previous labor delivered by the consumer, that's my whole point.

What I'm trying to say is that buying for consumption is a not a net contribution to the economy. It is a neutral act, because you're simply collecting what society owes you for past production. You've already done the work to earn the money in your pocket, which presumably helped someone with something.

Going back to our two person economy, what if the berry-picker, rather than trading his berries for roots directly, simply exchanges berries for an iou for future roots? Does it harm the root-digger in any way if the iou is never brought up again? No, it helps him. He's already been paid in berries, but now he doesn't have to do the work to earn them.

That's essentially what money is, society's iou. Therefore, conspicuous consumption doesn't really help or hurt anyone. Earning without consuming might, however.

This may raise the question of where unemployment comes from, if not a lack of demand. There is an answer according to this theory, but that may be too far off-topic.

Topazan: nobody produces something without the expectation of a market being there to buy it. That's anticipating demand.

Without the demand, you produce something that never quite manages to sell the units produced due to the market not being interested (not looking at you, Sinclair C5).

edited 25th Nov '12 1:06:09 PM by Euodiachloris

Without production, or at the very least the anticipation of future production, there is no demand.

If there was no demand, people would still produce things for themselves. This is not demand in the economic sense.

Again, demand can determine what gets produced, and for who, and producers that fail to produce the right things for the right person suffer, but a loss of one type of demand does not prevent the producer from shifting production to something else for someone else.

Production creates demand, not the other way around. Demand determines the form that production takes, but it doesn't create production*

.

edited 25th Nov '12 2:03:00 PM by Topazan

Topozan- I cant make head or tails out of your attempts to redefine the term "demand" so that you don't have to concede the point. Lets just concede that both demand and production are necessary to exchange value and move on.

It's been a long time since I've had an econ class, so I wasn't aware I was redefining the term demand. I was speaking of demand in terms of the intersection of two things:

• The desire for a product.
• The ability to pay for that product.

It's pretty useless from a business point of view to have one without the other. There's a reason why it's charitable act, rather than a profitable act, to deliver famine relief to a drought stricken third world village. Their desire for the relief supplies is strong, but they can't pay for them because what little productivity they had was destroyed by the drought.

Because human desires are practically unlimited, it is the ability to pay that is the limiting factor of demand. This ability is only increased by production. Your customers pay for your products with the produce of their labor.

The issue in this thread is whether or not conspicuous consumption creates jobs. I maintain that it does not. It simply moves those jobs from other industries, because a lack of demand was not the limiting factor of job growth in the first place.

Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that.

Which was exactly how I was defining "demand" in the market sense.

Without demand, there is no reason to produce... without production, demand has to go begging... until the value of the wanted goods either increase in value to the point production highly worthwhile... or the demand itself stops. Yet, production without demand? And the goods just sit there taking up shelf-space, generating little wealth and a lot of loss. <shrugs>

It's a duality relationship: you can't get one without the other... and both require the other to generate wealth. This was the point I was trying to make.

edited 25th Nov '12 5:58:37 PM by Euodiachloris

Perhaps thinking of it in terms of "wealth" is inappropriate... Wealth implies property, power over something, when a lot of the time we're talking about stuff that "exists" more than "is owned".

Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that.

If you define demand in that way, then production doesn't need demand because it creates demand.

Production without demand does exist for The Aloner. Demand without production to pay for it is not demand at all, it's desire.

Again, demand determines the form production takes. People are going to invest their resource where they'll get the best return. In that way, it is part of the productive process, but if products are sitting idle on the shelves, it's because of bad information about the nature of demand, not a shortage.*

Going back to the topic of conspicuous consumption. The rich guy who's thinking about buying a rolex has already produced when he earned the money*

. Him spending the money on a personal purchase now cannot increase the total amount of production, it can only determine what form it will take.

EDIT: How about this: In a free market, all production is ultimately for one's own benefit. If the market does not provide demand, you'll still be ok as long as you can produce things for yourself. This would be a huge step back in quality of life not because you aren't working for other people any more, but because they aren't working for you. Their production is what you want, and their demand is only how you get it.

edited 25th Nov '12 7:48:35 PM by Topazan

Topazan, we've known that production alone doesn't work since the Great Depression. We had warehouses filled with crap that no one was buying. You have to come at it from both sides. Any high-school economy teacher can tell you that.

Unfortunately, the world's politicians apparently skipped that particular class, but that doesn't make it less true.

No one was buying it because no one had any money, because they were unemployed (ie not producing). Demand stops when production stops.

Again, unemployment is another issue that I'm not going to get into at the moment.

I already said I know that this is not the mainstream view, but I await a refutation that doesn't rely on Appeal to Authority.

edited 25th Nov '12 8:53:30 PM by Topazan

Bridges to Nowhere, the zombie businesses of the Japanese Bubble and other attempts at make-work jobs... such things argue that producing just to keep going ain't a good move when demand is not around to be supplied.

Whether people have no money or no interest to buy whatever it is you're hoping to sell... it doesn't matter: the result is the same if you've over-produced.

We're not talking Appeal to Authority: we're talking History, here.

edited 25th Nov '12 9:06:36 PM by Euodiachloris

I think it's kind of a silly thing to say. Why build bridges to knowhere if there's the slightest possiblity to build a bridge to somewhere? And why bother making unnecessary bridges and calling them such, when, if you're going to spend that money anyway, you might as well make an actual monument that follows Rule of Cool and that people will want to come see?

Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that.

The usual thinking is that 1) we're building infrastructure! 2) it'll come in handy once things pick up and 3) it's good for the construction industry. A lot of the time, they were supposed to go places... but... It just didn't turn out that way.

Trying to force social engineering via architecture is also usually a failure when there's no demand from the population for it. Top down can sometimes work... if the top has done its homework and actually bothered to consult the bottom a bit to work out what it might actually need.

Even then... group psychology doesn't always go along the same lines a designer's mind might. <shrugs>

edited 25th Nov '12 9:13:09 PM by Euodiachloris

Those are cases of trying to fix the economy by introducing artificial demand. The exact opposite of what I'm saying.

Ordering a bridge to nowhere does not help because it does not increase production. Like all demand, it only moves existing production around.