… the point about a Veblen Good is not that sales rise when prices do. Rather, it’s that a Veblen Good is desirable because it is expensive. It is a way of showing that you can afford to buy something expensive. That you can afford something expensive is a sign of social status (well, it is in our society, where having lots of money and thus being able to buy something expensive is a sign of social status. It’s possible to imagine other societal forms which don’t include this).
The archetypal example was certain of the Vanderbilt women who would have diamonds implanted into their backs, where they would be visible to people at parties given the low cut backs of dresses at the time. The point of such implantations simply being to show that one had enough money (and perhaps little enough sense in a pre-antibiotic era) to have a diamond implanted over one’s spine. There’s a story that Mick Jagger had a diamond implanted into one of his teeth for the same sort of reason at one point (removed when it promoted caries).
The point being that a Veblen Good does signal something, and as such the greater the price the more desirable the ability to transmit that signal. But it doesn’t go as far as stating that the more the price rises then the higher sales go.
Tim Worstall, “Being Quoted In The New York Times Is Great But…”, Forbes, 2014-11-22.
December 14, 2015
QotD: Veblen goods
November 1, 2015
QotD: Germany’s class system
As a trader, I am inclined to think the German will, unless his temperament considerably change, remain always a long way behind his Anglo-Saxon competitor; and this by reason of his virtues. To him life is something more important than a mere race for wealth. A country that closes its banks and post-offices for two hours in the middle of the day, while it goes home and enjoys a comfortable meal in the bosom of its family, with, perhaps, forty winks by way of dessert, cannot hope, and possibly has no wish, to compete with a people that takes its meals standing, and sleeps with a telephone over its bed. In Germany there is not, at all events as yet, sufficient distinction between the classes to make the struggle for position the life and death affair it is in England. Beyond the landed aristocracy, whose boundaries are impregnable, grade hardly counts. Frau Professor and Frau Candlestickmaker meet at the Weekly Kaffee-Klatsch and exchange scandal on terms of mutual equality. The livery-stable keeper and the doctor hobnob together at their favourite beer hall. The wealthy master builder, when he prepares his roomy waggon for an excursion into the country, invites his foreman and his tailor to join him with their families. Each brings his share of drink and provisions, and returning home they sing in chorus the same songs. So long as this state of things endures, a man is not induced to sacrifice the best years of his life to win a fortune for his dotage. His tastes, and, more to the point still, his wife’s, remain inexpensive. He likes to see his flat or villa furnished with much red plush upholstery and a profusion of gilt and lacquer. But that is his idea; and maybe it is in no worse taste than is a mixture of bastard Elizabethan with imitation Louis XV, the whole lit by electric light, and smothered with photographs. Possibly, he will have his outer walls painted by the local artist: a sanguinary battle, a good deal interfered with by the front door, taking place below, while Bismarck, as an angel, flutters vaguely about the bedroom windows. But for his Old Masters he is quite content to go to the public galleries; and “the Celebrity at Home” not having as yet taken its place amongst the institutions of the Fatherland, he is not impelled to waste his, money turning his house into an old curiosity shop.
Jerome K. Jerome, Three Men on the Bummel, 1914.
October 18, 2015
Playboy‘s biggest market today
Colby Cosh on why the Playboy brand is so attractive to the Chinese market:
… Playboy was once an important cultural force; and what are Chinese men and women buying when they buy jewelry or clothing with the Playboy bunny on it? They are buying a small stake in an anti-puritan, worldly vision of the good life. Hugh Hefner’s “Playboy philosophy,” which he used to set out in windy essays sandwiched between the pictorials, is still considered good for a laugh decades later. But every magazine does express a philosophy, whether or not it chooses to yammer on about doing so, and Playboy’s epicureanism was a powerful one. It practically amounted to a guarantee to the customer: if you bought Playboy, the only uplift you were at risk of encountering would involve lingerie, not morality.
When you were done being titillated by an issue of the magazine, the ads and the articles about stereos and cigars and cocktails were there to linger as an aftertaste, making a subtle but sharp imprint on one’s endocrine system. It is hard for us to appreciate what this kind of thing means in a strongly collectivist, egalitarian society. People who visited the old Soviet bloc, and who saw what blue jeans or heavy-metal cassettes did to the brains of the people there, will have some idea. It is an enigma of 20th-century history: stuff that seems trivial to a Western consumer somehow encodes a message of choice and private aspiration that can never be expressed as powerfully as an explicit proposition.
July 3, 2015
“People with money have alternatives”
Frances Woolley on the hidden advantages even a modest amount of money can provide:
Less often observed is that wealth itself generates consumption benefits, even if one never spends a dime of it.
I own a 12 year old Toyota Matrix. The front fender has collided with one too many snow banks, and is now held together with string. The exhaust system has seen better days. It breaks down occasionally. But overall it’s very cheap to run.
If I was poor, it would be tough having an old, unreliable car. The unexpected, yet inevitable, major repairs would be a financial nightmare. $750 to repair the clutch. $200 to fix the axle seal. If the car broke broke down, and I couldn’t get to work, I might lose my job.
But because I’m financially secure, I can afford a cheap car. I can self-insure against financial risks: unexpected repair costs, taxi fares, rental cars, and so on. I can afford to get my car towed. If it was beyond repair, I could get another car tomorrow.
The real value of having $10,000 in the bank isn’t $200 in interest income, or the stuff $200 in interest income might buy. $10,000 in the bank creates a little bit of room to take risks. One could call it the “implicit value of self-insurance generated by own capital.” It’s the comfort of being rich (or having rich relatives). It’s real. It’s valuable. But it wouldn’t be taxed if Canada had a consumption tax.
Admittedly, the insurance value of having wealth isn’t taxed under an income tax either. But at least under an income tax some of the return on wealth is taxed, so there is, at least potentially, some shifting of the tax burden onto those with wealth.
The greatest freedom money offers is the freedom to walk away. Your bank doesn’t offer you unlimited everything with no monthly fees? Walk away. There’s always someone else who wants your money. Your phone plan is too expensive? Walk away (o.k., that may not be the best example).
People with money have alternatives, which makes their demand for goods and services elastic. Food may or may not cost more in poor areas. But a rich person can shop at Value Village if he chooses. A poor person may not be able to afford expensive purchases which save money in the long run, like bread machines or high efficiency appliances or pressure cookers. Consumption taxes aim to tax the amount of stuff people actually consume. But if poor people pay a higher price for their stuff than rich people, is a system that taxes only consumption spending, without taking into account the ability to command consumption wealth conveys, fair?
May 21, 2015
QotD: Silicon Valley hypocrisies
The point of reviewing these hypocrisies is not to suggest that the rich profit-makers of Silicon Valley are any greedier or more cutthroat than the speculators of Wall Street or the frackers of Texas, but merely that they are judged by quite different standards. Cool — defined by casual dress, hip popular culture, and the loud embrace of green energy, gay marriage, relaxation of drug laws, and other hot-button social issue — means that one can live life as selfishly as he pleases in the concrete by sounding as communitarian as he can in the abstract. Buying jet skis is as crass a self-indulgence as buying an even more expensive all-carbon imported road bike is neat.
If Silicon Valley produced gas and oil, built bulldozers, processed logs, mined bauxite, or grew potatoes, then the administration, academia, Hollywood, and the press would damn its white-male exclusivity, patronization of women, huge material appetites, lack of commitment to racial diversity, concern for ever-greater profits, and seeming indifference to the poor. But they do not, because the denizens of the valley have paid for their indulgences and therefore are free to sin as they please, convinced that their future days in Purgatory can be reduced by a few correct words about Solyndra, Barack Obama, and the war on women.
Practicing cutthroat capitalism while professing cool communitarianism should be a paradox. But in Silicon Valley it is simply smart business. The more money you make, any way you can make it, the more you can find ways of contextualizing it. At first these Silicon Valley contradictions were amusing, then they were grating, and now they are mostly just pathetic.
Victor Davis Hanson, “The Valley of the Shadow: How mansion-dwelling, carbon-spewing cutthroat capitalists can still be politically correct”, National Review, 2014-07-22.
May 6, 2015
China’s burgeoning wine industry
At The Diplomat, Jack Detsch looks at the rapidly increasing Chinese wine sector:
China has surpassed France, the world’s foremost producer and exporter of wine, in total acreage, but don’t expect to bring a Ningxia over to a dinner party any time soon.
“I think they largely have the wrong grapes planted,” Geoff Kruth, Chief Operation Officer of the Guild of Sommeliers, a Sonoma-based non-profit, says. “They’re trying to model Bordeaux and plant cabernet – things that may not even really grow well there.”
Production is still on the rise, with China pushing through the ranks from the world’s eighth largest producer of wine in 2013 to the sixth biggest in 2016, due to growing acreage and soaring domestic demand. Wine consumption in China has increased by nearly 45 percent in the past 15 years, and vine planting jumped by 5 percent in 2014 alone, up to a total of 1.97 million acres, according to the International Organization of Vine and Wine. Chinese consumers have an especially discerning palate for red wine. In 2013, China became the world’s largest market for reds, a lucky color in folklore, downing 1.86 billion bottles, moving past France in that category. Per capita consumption is also on the rise.
But many Chinese vineyards aren’t producing wines yet, and much of the acreage dedicated to growing grapes is still used for appetizers and brandy, not wine. The majority of wine producers in Eastern and Western China, where companies in Xinjiang, Ningxia, and Gonsu have had success, produce bulk wine. At times, they’ve been competitive on a global level: in 2011, Jia Bei Lan, a winery in Ningxia, took home a coveted international gold medal for its 2009 Bordeaux blend.
January 28, 2015
The great and the good gather at Davos
And Monty calls ’em exactly what they are:
Luckily, all is not lost. Our moral and ethical betters have gathered in Davos to light their cigars with hundred-dollar bills while mocking the tubercular bootblack who’s been pressed into service to keep their shoes looking spiffy while they chat and laugh and eat lobster canapes. Oh, wait, I read that wrong, sorry. They’re in Davos to discuss the pressing problem of Global Warming(tm). Because they’re so concerned about Global Warming(tm) that they felt compelled to fly their private jets to an upscale enclave in the Swiss Alps to talk about it. While making fun of the tubercular bootblack who’s spit-shining their wingtips.
Don’t get me wrong – I’m a big believer in ostentatious displays of wealth. If I had the money, I’d build a hundred-foot-high statue of myself made out of pure platinum and then hire homeless people to worship at it for no fewer than eight hours per day. (I’d pay them a fair wage, though. What’s the going rate for abject obeisance to a living God? I’ll have to look it up.) But this Davos thing is just…rank. It’s a collection of rich fart-sniffers who want to congratulate each other on how socially conscious they are, and how much they care about the Little People. (Except the tubercular bootblack, whom they often kick with their rich-guy shoes.)
July 22, 2014
QotD: Drinking wine
Follow the advice of wine merchants, wine clubs, wine waiters, even wine journalists, but never forget that your own taste is the final judge. Like the solicitor who keeps his clientele safely under sedation by the use of fanciful legal jargon — did you know that any fool can do his own conveyancing, i.e. legally transfer property between himself and another? — so the wine snob, the so-called expert and the jealous wine merchant (there are a few) will conspire to persuade you that the subject is too mysterious for the plain man to penetrate without continuous assistance. This is, to put it politely, disingenuous flummery. It is up to you to drink what you like and can afford. You would not let a tailor tell you that a pair of trousers finishing a couple of inches below the knee actually fitted you perfectly; so, with wine, do not be told what is correct or what you are sure to like or what suits you. Specifically:
(a) Drink any wine you like with any dish. You will, in practice, perhaps find that a heavy red burgundy drowns the taste of oysters (though my wife likes claret with them), or that a light flowery hock is overpowered by a steak au poivre. But what is wrong with red wine and chicken, a light claret accompanying a Dover sole? The no-reds-with-fish superstition is widespread and ingrained, so much so that, in the film of From Russia, With Love, James Bond was able to say, in jest but without further explanation, that he ought to have spotted one of the opposition when the man broke that “rule” in the dining-car of the Orient Express. All he should reasonably have inferred was that the chap was rather independent-minded. I myself will even more happily drink a hock, a Moselle, or an Alsatian wine with my fish stems from the other fact that I am particularly fond of hocks, Moselles, and Alsatian wines. The North of England couple I once read about who shared a bottle of crème de menthe (I hope it was a half-bottle) to go with their grilled turbot should be an inspiration, if not a literal example to us all. Anyway, why not start by choosing a wine you know you like and then build your meal round it?
(b) Vintages — aargh! Most of the crap talked about wine centres on these. “The older the better” is another popular pseudo-rule. It does apply up to a point to chateau-bottled clarets, especially those known as classed growths. This is a precise technical term, not a piece of wine-snobs’ jargon, but I cannot expound it here: consult your wine merchant or wine encyclopedia. There are rich men who will drink nothing but old first-growth clarets to show their friends how well they know their wines (and how rich they are). These are likely to be wonderful wines, true, but such men are missing a lot — see below. And old wines as such are not necessarily good: they may well have gone off or always have been bad, whatever that bloody vintage chart or card may have said. Throw it away, or keep it in a drawer until you know the subject a bit and can pick up cheap the good wines of a “bad” year.
Kingsley Amis, Everyday Drinking: The Distilled Kingsley Amis, 2008.
May 14, 2014
The rich boozehound’s guide to globetrotting
Got lots of money burning a hole in your bank account? Want to show off just how filthy stinking rich you are? Like spending your however-earned-or-inherited loot on fancy booze? Then there’s a million-dollar booze vacation you’ll probably like:
UK-based travel company Holidaysplease is offering a luxury world drinking tour in which you can learn and demonstrate the art of conspicuous consumption.
Starting and ending in London — although pickups are possible elsewhere — the ultimate hedonistic, money-no-object vacation takes in the world’s best hotels, swankiest restaurants and most exclusive bars in 10 upmarket destinations.
En route, drinkers take in the universe’s most ludicrously expensive niche beverages.
In Monaco, members of the bottomless budget brigade will mingle with other surreally high net individuals at the high end Hotel Hermitage Monte-Carlo and party at Flavio Briatore’s Billionaire Sunset Lounge in the hotel Fairmont Monte Carlo, quaffing selections from the $565,000 “in-house Armand de Brignac Dynastie” champagne collection.
It all comes complete with fawning waiters and diamond-filled ice buckets.
“We spend the first three nights in London in the five-star Corinthia Hotel and hang out in the Playboy Club, Park Lane, Mayfair,” says Byron Warmington of Holidaysplease.
Hef once said: “Life needs to be lived with a sense of style.”
As a taste of things to come, surrounded by grinning Bunnies, guests will sample the glam high life and swallow what’s reported to be the second most expensive drink in the history of mixology.
The Legacy cocktail includes 1788 Clos de Griffier Vieux Cognac, which comes in at $21,000 for a 40 ml shot.
It also includes ancient Kummel liqueur, vintage orange Curacao and four dashes of circa 1900 Angostura bitters.
April 18, 2014
QotD: Opera
Opera, to a person genuinely fond of aural beauty, must inevitably appear tawdry and obnoxious, if only because it presents aural beauty in a frame of purely visual gaudiness, with overtones of the grossest sexual provocation. The most successful opera singers of the female sex, at least in America, are not those whom the majority of auditors admire most as singers but those whom the majority of male spectators desire most as mistresses. Opera is chiefly supported in all countries by the same sort of wealthy sensualists who also support musical comedy. One finds in the directors’ room the traditional stock company of the stage-door alley. Such vermin, of course, pose in the newspapers as devout and almost fanatical partisans of art; they exhibit themselves at every performance; one hears of their grand doings, through their press agents, almost every day. But one has merely to observe the sort of opera they think is good to get the measure of their actual artistic discrimination.
The genuine music-lover may accept the carnal husk of opera to get at the kernel of actual music within, but that is no sign that he approves the carnal husk or enjoys gnawing through it. Most musicians, indeed, prefer to hear operatic music outside the opera house; that is why one so often hears such things as “The Ride of the Valkyrie” in the concert hall. “The Ride of the Valkyrie” has a certain intrinsic value as pure music; played by a competent orchestra it may give civilized pleasure. But as it is commonly performed in an opera house, with a posse of flat beldames throwing themselves about the stage, it can only produce the effect of a dose of ipecacuanha. The sort of person who actually delights in such spectacles is the sort of person who delights in plush furniture. Such half-wits are in a majority in every opera house west of the Rhine. They go to the opera, not to hear music, not even to hear bad music, but merely to see a more or less obscene circus. A few, perhaps, have a further purpose; they desire to assist in that circus, to show themselves in the capacity of fashionables, to enchant the yokelry with their splendor. But the majority must be content with the more lowly aim. What they get for the outrageous prices they pay for seats is a chance to feast their eyes upon glittering members of the superior demi-monde, and to abase their groveling souls before magnificoes on their own side of the footlights. They esteem a performance, not in proportion as true music is on tap, but in proportion as the display of notorious characters on the stage is copious, and the exhibition of wealth in the boxes is lavish.
H.L. Mencken, “The Allied Arts: Opera”, Prejudices: Second Series, 1920.
March 2, 2014
Why the EU hesitates to do anything about Ukraine
Extreme wealth, whether honestly or dishonestly acquired, seems these days to bring forth little new except in the form and genre of vulgarity. Mr. Ambani’s skyscraper tower home in Bombay is a case in point: His aesthetic is that of the first-class executive lounge of an airport. Mr. Ambramovich’s ideal is that of a floating Dubai the size of an aircraft carrier. Only once have I been invited to a Russian oligarch’s home, and it struck me as a hybrid of luxurious modernist brothel and up-to-date operating theater. I saw some pictures recently of some huge Chinese state enterprise’s headquarters, and it appalled me how this nation, with one of the most exquisite, and certainly the oldest, aesthetic traditions on Earth, has gone over entirely to Las Vegas rococo (without the hint of irony or playfulness).
But it was the luxury and not the taste of Yanukovych’s homes that outraged the Ukrainians, for if by any chance they had come into money they would have done exactly the same, aesthetically speaking. Yanukovych may have been a dictator of sorts, but when it came to taste he was a man of the people. A horrified Ukrainian citizen, touring one of his homes after his downfall, was heard to exclaim, “All this beauty at our expense!”
As to politics, the Ukrainian crisis has once again revealed the European Union’s complete impotence. Physiognomy is an inexact science, but it is not so inexact that you cannot read the bemused feebleness on the faces of people such as Van Rompuy, Hollande, and Cameron, the latter so moistly smooth and characterless that it looks as though it would disappear leaving a trail of slime if caught in the rain. Mrs. Merkel has a somewhat stronger face, but then she has the advantage of having spent time in the Free German Youth (the East German communist youth movement), which must at least have put a modicum of iron in her soul.
Be that as it may, Russia holds all the trump cards in this situation. It can turn off Western Europe’s central heating at a stroke, and for Europeans such heating is the whole meaning and purpose of life—together with six-week annual holidays in Bali or Benidorm. Therefore Europe will risk nothing for the sake of Ukraine, except perhaps a few billion in loans of no one’s money, a trifle in current economic circumstances. If Bismarck were to return today, he would say that the whole of Ukraine was not worth the cold of one unheated radiator.
November 3, 2013
Statue envy
Tunku Varadarajan on India’s big statue and what it means:
Narendra Modi is the chief minister of the western Indian state of Gujarat, and he believes that his beloved India is a land of political pygmies. India’s current prime minister, whose job Modi covets to distraction, is an effete old technocrat who takes his orders from the bossy Italian widow of a former prime minister (who was himself the son of a prime minister, and the grandson of another). The old technocrat’s days in office are numbered, and his replacement as prime ministerial candidate for the ruling Congress party is Rahul Gandhi, the son of the Italian widow (she who must be obeyed), a clumsy “crown prince” of threadbare intellect who would inspire little confidence as the manager of a New Delhi pasta joint, let alone as prime minister of India.
India is a land of political midgets, damn it, and Narendra Modi is going to do something about it. To compensate for the meager stature of those with whom he must rub shoulders, he is going to give his country a giant statue — the tallest the world has ever seen. At 597 feet, this “Statue of Unity” will dwarf a 502-feet tall Buddha built in China in 2002, giving India — which suffers from a desperate form of penis-envy of China — something bigger at last than its massive northern neighbor. The statue, to be situated in Gujarat and made of bronze, iron and cement, will cost a scarcely trivial $340 million, much of which will come, in spite of Modi’s free-market protestations, directly from taxpayers who earn no more than $1,400 per annum. Do the moral math. (The official boast is that it will take only 42 months to build, although you’ve got to believe that the Chinese could complete the task in half the time.) When fully erect, it will be twice the height of the Statue of Liberty and four times that of Christ the Redeemer in Rio. “The world will be forced to look at India when this statue stands tall,” Modi has said. Indeed: But with what kind of gaze?
April 11, 2012
QotD: The silly claims about “capitalism in crisis”
Yes, times are tougher than they otherwise could be; however, to claim that the bumps in the road over the last few years show that “capitalism is in crisis” is absurd.
[. . .]
Even with the a few recessions, Real per-capita Gross Domestic Product is a lot higher than it was in 1960, 1970, 1980, 1990, or 2000. The truly unique fact about the world as it has changed in the last few centuries is that, as a number of economic historians have emphasized, we live in a world where economic growth is taken to be the norm. […]
Indeed, as the economist Joseph Schumpeter pointed out long ago, capitalism has given us the time and energy to criticize capitalism. People content themselves by being outraged at working conditions in Foxconn plants in China. However, it is the economic growth we have achieved in the western world that allows us the comfortable working conditions from which we express horror at working conditions elsewhere in the world. Further, not all the workers are greeting the reformers as saviors (HT: Doug Stuart). If people are willing to trade off longer working hours for higher incomes, I don’t see how it’s my right to stop them.
[. . .] Donald J. Boudreaux points out how we have to be very careful with income data if we are going to get an accurate picture of trends in standards of living.
If we’re going to talk about “stagnation” we also have to be very clear about precisely what we mean. Consider the near-ubiquity of the iconic gizmo of the early 21st century and its technological cousin: the smart phone and social media. My Forbes.com colleague Erik Kain reported in February that “472 million smartphones were sold worldwide in 2011.” In a world of 7 billion people, the top 1% would be 70 million people. If all the gains really went to them, that would be about six and a half smartphones each for the members of the world’s Top 1%. I’m pretty sure that isn’t what’s happening.
Art Carden, “It’s the Final Crisis of Capitalism, Charlie Brown!”, Forbes, 2012-04-10
March 30, 2011
For the bacon fans
Restaurants have been known to capitalize on food trends, but few dare go as far as Denny’s:
Denny’s is bringing on the bacon.
The all-American diner is about to begin advertising a new limited-time menu of seven bacon-centric items for breakfast, lunch and dinner dubbed “Baconalia.” While the bacon trend has been several years in the making, the $548 million chain is capitalizing on it now because “we truly believe the bacon trend is here to stay” said John Dillon, VP-marketing and product development at Denny’s. “We’re not on the cutting edge, but, we’re really bringing it mainstream by being the first chain to offer it on a fully dedicated menu. No chain has embraced it like we have.”
Among the items included in Baconalia are Bacon Meatloaf, Ultimate Bacon Breakfast Triple Bacon Sampler — with, you guessed it, three kinds of bacon — as well as items that employ more unconventional uses for bacon, such as Bacon Flapjacks and the Maple Bacon Sundae, an ice-cream sundae with maple-flavored syrup and sprinkling of bacon. Mr. Dillon said that so far, the sundae has generated the most buzz and excitement.
February 3, 2011
Urban China: growth market for luxury goods
The most liberalized areas of China have become a magnet for the purveyors of ostentatious luxury items:
The Chinese may have an age-old reputation as great savers, but China’s young people are now making up for generations of lost spending time.
Compared with the austere youth of China’s older generations, who went through the turmoil of the Cultural Revolution and strove to build savings in a nation without a social safety net, the young, raised in an unprecedentedly wealthy China, are spending freely.
[. . .]
As the world’s fastest growing luxury market, China’s appetite for high-end Western branded goods is fast becoming insatiable, with predictions by Boston Consulting Group suggesting that within five years, 29 percent of global luxury product consumption will come from China. And while European and US luxury sales are making a slow recovery after the global financial crisis, China—relatively untouched and still optimistic—remains the most important market for luxury retailers. Indeed, this was the theme behind last year’s 5th Annual China Luxury Summit, which was given the grandiose subtitle of ‘China Luxury Market: An Oasis of Hope and Possibility’.
China as the deus ex machina of the luxury world is a concept familiar to European retailers. Last Saturday, for example, the Italian luxury brand Prada staged its first fashion show in Beijing. Like French cosmetics and perfume brand L’Occitane, which listed in Hong Kong last year, Prada is expected to have an initial public offering in Hong Kong.
No need to reiterate that this is only a phenomenon in the urbanized areas of China: the vast majority of Chinese consumers are unable to access the fast growing markets and still live to a large extent under the direct control of the party.
