Luxury Folly

I just re-listened to a Mars Hill Audio interview with Robert Frank about his 1999 book Luxury Fever: Money and Happiness in an Era Excess. It has been republished in 2010 by Princeton Univ. Press, because it is probably more relevant than ever.

Frank argues that we buy possessions that don't make us happy, because the incentives are wrong. Our consumer culture sends us the message that to be successful we must look the part. This means conspicuous consumption like the Lexus, the sprawling estate, and the flashy wardrobe with all the accessories. Inconspicuous consumption like vacation, family time, and relaxation, which we know are more fulfilling, are not incentivized by our consumer economy.

Thus Frank proposes a economic model that sounds more like what my grandparents knew. I've always wondered why during WWII the war effort at home was always about sacrifice and doing without. Today we're told that if we want to help, we need to get out and spend. We chart consumer confidence as a mark of a healthy economy. It's spending not savings, stupid!

Frank says not so fast. If we know what's good for us we need to change the game. Why not incentivize savings. Do away with income tax and set up a progressive consumption tax. Say a family pulls in $1,000,000, and they save $300,000. This means that they spent $700,000 on consumables, and this is their taxable income. The tax is graduated so that low and middle income families aren't made any poorer, and also have an incentive to save. This sounds like a distributism of savings.

Despite the poor economy, we've seen another decade of little to no savings among the majority of Americans. When you think about it, we must be out of our minds.

Many reviewers complain that Frank's vision doesn't take cultural realities into account. Just because we know that intangibles are better for us doesn't mean that we can quite worshipping the invisible hand of Adam Smith. Smith told us that the sum of individuals seeking their own interest adds up to the common good for all. This is the invisible hand of the self-regulating market, but it has infected us with luxury fever. Didn't Jesus say, "Do not store up treasures on earth where moth and rust destroy and thieves break in and steal, but store up treasures in heaven where moth and rust do not destroy and thieves do not break in and steal. For where your treasure is there your heart will be also." More intangibles please!

A former student of mine described our consumer economy as a once flowing river that has all but dried up. In order to keep it flowing the government has gone into debt buying two parts hydrogen for every one part oxygen and flooding the basin of consumerism. This is an artificial stimulant that gets us spending again. But it leaves us with the hangover of buyer's regret, and a government that's going to take us down the drain with it.  I pray that this doesn't have to happen in order for us learn wisdom and change our incentives. "Righteousness exalts a nation, but sin is a reproach to any people" (Proverbs 14:34).