The Atlantic magazine has an interesting article on how conspicuous consumption – the practice of showing off luxury goods – differs across social groups and seems to be more common when your peers are low earners.
The piece discusses work led by economist Kerwin Charles who was interested in why, despite being less well off on average, black and latino Americans spent a larger proportion of their income on visible goods.
Their research found that race, in itself, wasn’t important, as conspicuous consumption was explained in all racial groups as being almost entirely due to the wealth of the community in which the person lives.
It turns out that the poorer the community, the larger the level of conspicuous consumption. In other words, people from less well off communities have a greater need to advertise their wealth through the visible goods they buy.
The full paper is available online as a pdf if you want the full details, but the Atlantic article goes on to observe that in higher-income communities people tend to spend their money on luxury goods others can’t see, but which provide experiences.
Russ Alan Prince and Lewis Schiff describe a similar pattern in their book, The Middle-Class Millionaire, which analyzes the spending habits of the 8.4million American households whose wealth is self-made and whose net worth, including their home equity, is between $1 million and $10 million. Aside from a penchant for fancy cars, these millionaires devote their luxury dollars mostly to goods and services outsiders can’t see: concierge health care, home renovations, all sorts of personal coaches, and expensive family vacations. They focus less on impressing strangers and more on family- and self-improvement. Even when they invest in traditional luxuries like second homes, jets, or yachts, they prefer fractional ownership. “They’re looking for ownership to be converted into a relationship rather than an asset they have to take care of,” says Schiff. Their primary luxuries are time and attention.
Based on nothing but complete speculation, I wonder whether this simply provides a form of consumption which is conspicuous through other means – conversation or public display of action.
A study published last year (and covered by the Economist) found that priming people with ideas about attracting members of the opposite sex did trigger conspicuous consumption, at least in men, but also resulted in conspicuous altruism.
Perhaps a more subtle form of economic signalling, but with a similar intent – to display our status to others.