Luxury Fever: Money and Happiness in an Era of Excess [Englisch] [Taschenbuch]

Mr. Frank, I have some good news for you. I hope you haven't bought an expensive grill yet, because Sears sells a Kenmore propane grill, model 15400, for $129. This is not $89.95, but correcting for inflation it's almost certainly less than $90 in 1980's dollars. This is not an obscure label; it's available to Mr. Frank. This tale is repeated in product after product. I bought my first basic car for 1/5 of my first annual salary as a neophyte software developer. Although you can spend several years' salary on a car, you can now buy a basic car for less than 1/6 of a neophyte software developer's salary, and you will get a product substantially more durable, more reliable, environmentally cleaner, and safer than my first car.

The range of most products has increased, mostly by extending the range at the expensive end a lot and also extending the range in the cheaper end a little. The bottom end of most markets has not disappeared, whether the product was high-tech or mundane. There are a few markets, like housing and bike helmets, that have lost their bottom end for regulatory or safety reasons. $19.95 "Skid Lid" bicycle helmets are gone; good riddance, I say. Dormitory-style low-cost housing is also gone.

Mr. Frank then continues by claiming that the extension of important markets in the expensive directions inconveniences even those people who can't afford to or who don't want to purchase upscale goods, because if you don't spend yourself into oblivion you look shabby, with serious consequences. One of his leading examples is, for example, the need to wear a $2000 suit when interviewing for a job. I realize that it is a liberal axiom that societal rewards in an enthusiastically capitalist society is not primarily the result of hard work or native talent, but the result of capricious factors, but I've been on both sides of the interviewing desk recently. I've been offered both of the jobs I've interviewed for in a modest $200 suit, and when I was part of the team discussing a prospective hire we spent an hour or so discussing matters of substance, primarily the applicant's past achievements. If an applicant was odiferous or came to an interview in torn jeans and barefoot, we might not have seen past that and we might not have hired him. However, if he chose to spend $200 instead of $2000 for a suit to interview for an upper-middle-class professional job, the suit wouldn't matter. Perhaps it would matter for a high-roller $500,000/year job, but I'm not sure I believe that, since the hiring process for such a job would be even more meticulous and less likely to be capricious than in my market. Furthermore, the "requirement" for a $2000 suit is substantially less onerous to a person who would credibly apply for a $500,000/year job than it would be for me.

Another market where Mr. Frank believes that luxury fever squeezes out people who choose to spend modestly is housing. Here he feels that the problem that results is that you must overspend to get into a district with good schools. This may have been true in the 1960 decade, but starting around 1970 most states passed legislation or had court decisions that funded schools from a statewide tax base. There are differences in the academic achievements of various regions, but much of this variation is a result of parental involvement, not parental wealth.

I don't think Mr. Frank makes the case that gilded products are forced upon people who would not otherwise choose to buy them, at the cost of their humanity. Furthermore, if you do assume that society overspends on luxury goods and underspends on humanity, I don't think he makes the case that a steeply progressive consumption tax is the cure for the problem. I think he likes the idea of a progressive tax and of the social welfare state that it could support, and I think he built his argument to fit that result.

It will also have the effect of increasing savings (because income is not taxed until spent, the incentive to invest is boosted). This makes us all richer long-term as capital investments grow our standard of living.

The theory is well-explained -- perhaps too well-explained -- but the proposed solution is not. While Mr. Frank spends a couple of hundred pages explaining the problem, his solution - taxing consumption - is presented without question. But will it work? The goal of producing income is to spend it, and whether it's done now or later, the rich want to spend it all before they die. Doesn't it make sense that not taxing saving would simply defer consumption until later in life, and the rich would buy even *more* opulent goods later? The author never discusses this, or any other potential difficulties. Won't the rich just rent everything instead of buying? Won't people who might otherwise save, be instead persuaded to consume now, since they will be taxed more if they save to buy their dream good in a single future year? The point is not that these objections are unanswerable, but that they seem to never even occur to the author.

As for the disdain with which Mr. Frank treats the acquisition of luxury goods, the reader should be made more than a little uneasy. What he says about social pressure may have some merit, but is this the *only* reason someone buys a Ferrari? And what about those of us who do not feel the need to keep up, and buy goods purely because they will enrich our lives in other ways? Again, these shades of grey do not slow down Mr. Frank's thesis. And the reader who is told he is "polluting" by choosing to wear an expensive suit - the author uses the analogy without qualification or irony - would be justified in feeling that Mr. Frank would have done well to temper the observations in his book with an understanding that human motivations are not as black and white as he thinks.