I think, with low confidence, that the framing here is a little turned around. I suspect that people mostly don’t underinvest in things of genuine value because they’re overinvesting in a conspicuous consumption arms race. Instead, they overinvest in conspicuous consumption because they’re having trouble finding things of genuine value to invest in.
The “extravagant houses” example is instructive here. When wages go up, people often find that housing prices near work or preferred schools go up in tandem, so they can’t afford to invest more in this real good. It becomes a positional good. But house construction and renovation don’t become correspondingly more expensive because we haven’t regulated it as much, so to the extent that more of anything is bought, it has to be in the latter category, of only-mostly-positional goods.
Of course if you tax conspicuous consumption you can restore the balance – but it seems to me that the more natural solution is to relax constraints that make real resources artificially scarce.
Similarly, people on Facebook overinvest in wit and cleverness, because Facebook is an ephemeral medium that doesn’t reward writing things that will be of lasting use as references. The solution here is not to regret that wit is appealing, but to regret that creating lasting value is not – and try and fix the latter problem rather than the former.
Your 4th suggestion seems basically consonant with this.
I think this is plausible, but I’m not totally convinced. I think there are lots of valuable things to invest in. This is a little bit obscured at the level of the individual, because you can’t buy something unless lots of other people buy it. At the level of society, I think there are probably many ways that we could spend more resources to give rich people happier lives. (And many ways that we could use Facebook-post-writing efforts to create real value.)
That said, I certainly agree that e.g. increasing the appeal of “creating lasting value” is an easier/better route than decreasing the appeal of wit.
Regarding ‘relax constraints that make real resources artificially scarce’ - why not both your idea and the OP’s idea to tax positional goods? In the long run the earth/our future light cone really is only so big so don’t we need any and all possible solutions to make a utopia?
Attention is scarce. I wouldn’t lobby against such a tax, but I would advise people not to put energy into advocating for one, because I think it’s an especially inefficient solution.
Paul’s arguing for punitive taxes on positional goods for the sake of reducing wasteful consumption. I think Sumner’s mostly trying to argue that the social costs of taxing the consumption of the rich are low. I agree with the latter point, for roughly the same reason I disagree with the former; I think wasteful conspicuous consumption’s a side-effect of limited opportunities for more substantive consumption or investment.
I think, with low confidence, that the framing here is a little turned around. I suspect that people mostly don’t underinvest in things of genuine value because they’re overinvesting in a conspicuous consumption arms race. Instead, they overinvest in conspicuous consumption because they’re having trouble finding things of genuine value to invest in.
The “extravagant houses” example is instructive here. When wages go up, people often find that housing prices near work or preferred schools go up in tandem, so they can’t afford to invest more in this real good. It becomes a positional good. But house construction and renovation don’t become correspondingly more expensive because we haven’t regulated it as much, so to the extent that more of anything is bought, it has to be in the latter category, of only-mostly-positional goods.
Of course if you tax conspicuous consumption you can restore the balance – but it seems to me that the more natural solution is to relax constraints that make real resources artificially scarce.
Similarly, people on Facebook overinvest in wit and cleverness, because Facebook is an ephemeral medium that doesn’t reward writing things that will be of lasting use as references. The solution here is not to regret that wit is appealing, but to regret that creating lasting value is not – and try and fix the latter problem rather than the former.
Your 4th suggestion seems basically consonant with this.
I think this is plausible, but I’m not totally convinced. I think there are lots of valuable things to invest in. This is a little bit obscured at the level of the individual, because you can’t buy something unless lots of other people buy it. At the level of society, I think there are probably many ways that we could spend more resources to give rich people happier lives. (And many ways that we could use Facebook-post-writing efforts to create real value.)
That said, I certainly agree that e.g. increasing the appeal of “creating lasting value” is an easier/better route than decreasing the appeal of wit.
Regarding ‘relax constraints that make real resources artificially scarce’ - why not both your idea and the OP’s idea to tax positional goods? In the long run the earth/our future light cone really is only so big so don’t we need any and all possible solutions to make a utopia?
Attention is scarce. I wouldn’t lobby against such a tax, but I would advise people not to put energy into advocating for one, because I think it’s an especially inefficient solution.
Here’s a post by Scott Sumner (an economist with a track record) about how taxing positional goods does make sense:
http://www.themoneyillusion.com/?p=26694
Paul’s arguing for punitive taxes on positional goods for the sake of reducing wasteful consumption. I think Sumner’s mostly trying to argue that the social costs of taxing the consumption of the rich are low. I agree with the latter point, for roughly the same reason I disagree with the former; I think wasteful conspicuous consumption’s a side-effect of limited opportunities for more substantive consumption or investment.