Purchase Disorder

Jack Hirshleifer from the June 1999 issue

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That brings us to the problem of incentives, on which Frank swings both ways. Like most proponents of high taxes and big public spending, he is skeptical that tax penalties will have much of an adverse effect upon incentives. But earlier on he had claimed we were all working too hard. If that were so, the discouraging effect of high taxes should require no apology on his part--it might be just the corrective medicine needed to keep us at home playing with the kids.

Getting back to fundamental issues, the deep-seated biological and cultural forces underlying our desire to achieve and demonstrate high status will not be stamped out by a mere tax scheme. What will individuals with strong status drives do if punitive taxation deters them from conspicuous consumption? They will seek status by other means. Dr. Johnson said, "There are few ways in which a man can be more innocently employed than in getting money." And, he might well have added, in spending his own money.

If we discourage spending on consump-tion displays, some of the alternatives could be quite praiseworthy--for example, competition in philanthropy. Some high achievers may shift from big-salary jobs to careers of greater social value, perhaps in space exploration or scientific achievement. On the other hand, we can imagine competition for notoriety in evil, along the lines staked out by the Marquis de Sade or Larry Flynt.

Overall, however, the biggest status game in town is not big spending but acquiring power over other people. In short, politics. So a likely consequence of sumptuary legislation would be more and more intense contests over the perennial question, "Who shall be king?" As usual, Adam Smith said it best, in The Wealth of Nations: "It is of the highest impertinence and presumption...in kings and ministers, to pretend to watch over the economy of private people, and to restrain their expense, either by sumptuary laws, or by prohibiting the importation of foreign luxuries. They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will."

Still, I am inclined to defend Frank in one important respect: as a moralist and a Jeremiah. If our society is to remain at its barely civilized level, from time to time we do need to be reproved for the vulgarity of wasteful consumption, not to mention the in-your-face boorishness currently recommended by ideologies of self-assertiveness and self-esteem. Although all of us are at fault, it is up to those who cash in most of the benefits of civil society, the rich and powerful, to take the lead in restraint. Frank avoids smarmy preaching, but Andrew Carnegie had it right in saying that great wealth is a sacred trust.