Monday, June 14, 2010

Consumption Arms Race

How much of what we buy is based on how we imagine we will feel displaying it to the world rather than for its intrinsic value? If your friend or neighbor didn't buy that BMW last week, would your contentment with your Toyota Camry remained the same? Below, Robert Frank goes into more detail:

It’s common knowledge that advertisers try to persuade us that we need more and more stuff. But if we were really happier spending our money differently or taking more time off, and if it’s just the advertisers who are standing in our way, why don’t we just tune them out? Even when young, children seem to have a healthy cynicism about the claims of corporate advertising. Indeed we all are skeptical about advertising claims. That doesn’t mean we aren’t influenced by them, but if advertising were the only problem, I don’t think we would see a significant imbalance in our spending patterns.

The point is a lot of what we buy, especially positional goods such as housing, cars, clothing, and jewelry are primarily bought to signal wealth and status to our peers. There is definitely utilitarian value in all of these things but when we buy a watch, how much of that decision is based on how we think it will make us look and feel rather than the watch’s actual features?

It’s not that we’re dupes of the advertisers; it’s not that we’re manipulated by special interests; it’s not that we’re those frail, irrational creatures that social critics often make us out to be. Rather it’s that many of the decisions we confront are like those confronting participants in a military arms race. Countries don’t buy bombs because they’re stupid; they buy them because it’s bad not to have bombs when the other side has bombs. But although it is not stupid for individual nations in that situation to buy bombs, it can be extremely beneficial for them to forge agreements to limit the number of bombs they buy — provided each side can police the agreement and make sure that the other abides by it.

Similarly, although the evidence suggests that we would be happier if we all bought smaller houses and cars, and spent what we saved in the process on a variety of less conspicuous forms of consumption, that is not an option open to individual consumers.

Now that everyone can lease a BMW or Porsche, the value of displaying what goods one buys is increasingly not as important or gratifying. With debt, any average Joe can buy most things. What an average Joe lacks is time and discernment.

Accordingly, people are moving beyond just goods and products to services and experiences--in particular, their travel experiences. The new medium of Facebook only amplifies this trend; you can now show off your recent travel experiences to the wonder and envy of all your friends and peers.

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