Matthew Syed Does Conspicuous Consumption Without Veblen

Sigh, there's a reason we don't get our economics from whiff whaff players

I may have muttered something about Matthew Syed and economics before. That was when he attempted to attack minerals economics. This example is about conspicuous consumption which he manages to discuss without even making reference to Veblen. All the while claiming that economists think that conspicuous consumption doesn’t, or shouldn’t exist. Which is really remarkable - and thus the remarking.

OK, so the background here is luxury goods, the appearance of luxury being something created by marketing. So, LVMH, Hermes and all the rest:

a Frenchman called Bernard Arnault, who has taken the art of selling fantastically overpriced merchandise (he is the founder of LVMH, a group that owns brands like Louis Vuitton) to new heights.

The craftsmanship may be superior to that of Nike’s mass-produced gear, but the mark-ups are even steeper. I am looking at the Capucines Mini bag on the Vuitton website — promoted as “deep-dyed black Taurillon leather and topped with a ‘crown’ of gold-colour Monogram Flowers”. It costs £5,300.

You might suppose that Vuitton and the like are bought only by the super-rich, but the target market for luxury brands is the aspiring middle class, the only demographic that can provide what retailers call volume (in a perhaps unintentionally revealing podcast, a Vuitton executive revealed that billionaires no longer buy its stuff).

Yeah, OK. Tsk even. People getting rich on the foibles of the aspirational. Very Tsk.

But Syed also tells us this:

Sorry if this sounds brutal but it’s the truth (my truth, if you prefer). The Nike business model is, after all, simple: it produces low-cost items (at one time with the liberal use of sweatshops) and charges an extortionate mark-up via the ruse of canny marketing.

Now there was a time when economists thought such business models were doomed. Why would people pay premium prices for products just because of the celebrity endorsing them? It isn’t just sportsmen, by the way: the ploy also includes big names advertising products with no connection whatsoever to their day job.

Why would economists think such a model was doomed? Selling to wannabes seems like exploiting an inexhaustible resource to be honest. Rather more importantly, economists have considered this, worked through it, and have known for well over a century why it does work. For the same reason the peacock’s tail does - more sex.

Here’s where we need to make an important point about economics. It is not a normative subject - here is what should happen. The sheeple wake up to being ripped off then revolt. Nope, it’s a positive subject - here’s what the people do.

This idea that we buy Hermes simply because it’s Hermes is a specific form of conspicuous consumption. We are showing the world that we are the sort of people who know to buy Hermes, can afford to buy Hermes and therefore do buy Hermes. It’s social signalling.

In this sense it’s just like the peacock’s tail - it gets us laid more. Or, for the distaff side, perhaps laid by the better types one can get laid by. As Darwin pointed out this is all female choice in who she gets laid by. The male has to compete - with other males - for that ability to do the getting laid bit. Anything which helps males in that battle will therefore thrive.

Among humans yes, we do get musculature and so on being so used. But the prime determinant of sexual choice among human males is social position. The higher the more choice. So, things which demonstrate higher social position will thrive among humans.

Thus conspicuous consumption. And a side issue of this is males buying, for their lays, similar signals of such status. For that then advertises to other, not being laid as yet, females the likely outcome of their knee tremble.

Yes, this is all pretty cynical. But unless we do take social status as the determinant - and it doesn’t matter what form that status takes, nor in which fraction of society that status is gained - we’ll not be able to explain Gerry Healy getting laid by half the political groupies in the land (the other half he just raped of course).

But this is not just Darwin. Economists have noted this too. Economics is, after all, the product of tens of thousands of sometimes quite bright people thinking for the past couple of centuries. One of whom was Thorstein Veblen, who wrote Theory of the Leisure Class. From which we derive Veblen Goods. Which are what is being talked about with LVMH, Hermes and so on. Goods which specifically advertise the social status of those who have them and therefore become more desirable the more expensive they become. That explanation coming in, erm 1899.

Now there was a time when economists thought such business models were doomed.

Nonsense. That human hunt for social status means something like Hermes will always be a feature of a society containing humans.

Further, if social status doesn’t matter among humans then the concept of relative poverty is meaningless. So too this complaint from, erm, Matthew Syed:

In the UK the relative wage has dropped by almost 30 per cent over the same period.

If relative social status doesn’t matter then relative income does not. But if relative income does then social status does - which gives us Veblen Goods. Even if Veblen Goods are just a way of faking it they’re still going to work among humans.

The very idea of discussing conspicuous consumption without referring to Veblen would surprise most economists. Which is why, perhaps, we tend not to get our economics from whiff whaff players.