Climbing the Consumption Ladder Together
I just read a really interesting post by David at My Two Dollars. His post, “Which Jones family are you trying to keep up with?” struck a chord with me. I’ve been thinking and reading about consumption and psychology for a while now and I’m going to run with a bit of what David touched on.
Is TV making you spend?
David’s thesis as I read it is that people would be better off if, when comparing their lives to those around them, they did so with open eyes. He says that people are too susceptible to the effects of advertising and television. If they looked at their neighbors, they’d see people much like them in terms of lifestyle.
I have to disagree. I think that the media (e.g. advertising and TV) play a relatively small part in people’s consumption behavior. Certainly people do respond to advertising, but I don’t believe to the degree David seems to think.
Looking one rung up on the consumption ladder
No, I think the real cause of conspicuous consumption is that people do exactly what David advocates - look at those around them. The difference is that people compare themselves to others just one step higher on the consumption ladder. Instead of seeing the other Toyotas on their street (to take an analogy from David’s post), they see the one BMW. Instead of comparing their vacation to other people in their office who also went to Six 
Flags, they compare it to the one person who went to Italy.
It’s this kind of comparison that drives conspicuous consumption ever higher. When people look at their house, they don’t compare it to their old one bedroom apartment. They compare it to the 3,000 square foot McMansion they pass dropping their kid off at school. And the owner of the 3,000 square foot McMansion? He’s looking at the 4,000 square foot estate on 3 acres down the road.
I’m not going to make a judgment on whether a 3,000 square foot house is necessary. I’ll only mention that since the 1950s, the median U.S. home has doubled in size, while the median family has shrunk in size by close to 50%. Does a modern person take up that much more space? Yes, we’re fatter as a nation, but not that much fatter.
We’re all moving together
The real problem with this conspicuous consumption pattern of comparing ourselves to those just a little higher on the ladder is that we’re all moving up the ladder at more or less the same pace. The additional consumption isn’t getting anyone anywhere. People’s expectations have simply shifted. A perfectly good working refrigerator isn’t good enough anymore. It has to be a gigantic stainless steel one.
In the process of this expectation shift, though, we’ve spent a lot of money. Real money that could have been better used. Not only that, but people aren’t happier with their abundant lives.
So where does this leave us? I’d like to say that we can make a difference one person at a time. I’d like to say we’d be happier if we were all just thankful for what we have. I’d like to say you could just get off the consumption treadmill.
But the truth is, I can’t say those things because they’re not true. The plain fact is, what you do affects me. And when you spend half a million dollars to buy a four bedroom house in my town, that’s what I’ll also have to pay for a similar house. When you buy a two ton SUV, if I don’t want to lose badly in a crash with you, I also have to drive a two ton SUV.
To reduce conspicuous consumption, we have to do what economists like to say. We have to get the incentives right. I’m not sure of the details, but there’s a real need to limit consumption for its own sake. Making it worthwhile for all Americans to save would do us a world of good.
And it would reduce your mortgage payment, too.
September 12th, 2007 at 11:17 am
I think analysis makes sense. When I compare myself, it’s more likely to people who’ve been out of college and employed for a few years. Not as likely to my parents…
I’m working on learning to be happy at my level and embrace it. Positive changes—financially, or in employment, or in life-style—can be good, but only (I think) if we can learn to be happy at any of the levels. Otherwise we don’t appreciate the BMW but spend all our time longing for the…I don’t know cars, but something better.
September 12th, 2007 at 2:39 pm
September 13th, 2007 at 4:25 am
If you’re a regular comment reader on here, you might think Mrs. Micah is my wife. But I asked my wife, and she says it’s not her. So now that we’re clear…
We buy stuff because advertisers have generally tapped into our psyche, both in our natural tendencies as well as our culturally conditioned responses. Advertising is different in Japan, or in the Middle East for example, where their conditioned, non-capitalist responses are different. But advertisers there still tap into the susceptibilities that are common to all humans. We are all quite predictable beasts.
The key to getting over the urge to participate in this cycle is to either get above or outside the tractor beam in order to gain perspective. You can’t just follow similar neighbors or richer-acting neighbors or even frugal neighbors. They might make more money and spend less or they might make less money and spend more. None of that has much relation to their satisfaction with what they have or their overall happiness.
You need to gain some absolute standards to measure your consumption against. If you want to wisely invest some money, travel to a place where everyone is much poorer than you. And that doesn’t mean the homeless shelter. It means a place where EVERYONE is poorer than you; a place that has very little infrastructure and lacks the same civilized societal norms that we do. I’ve said before on here that just getting away from cities where there are billboards and box stores everywhere is very eye-opening. It’s a little overwhelming to return to the “real world” after extended periods away.
Once you see that you only NEED some things, you begin to appreciate the refrigerator that just works, the car that runs on a paved street, or even the one bedroom apartment. You’ll spend less, quickly making up for the cost of the trip, and you won’t feel like you’re repressing yourself. You’ll be much happier than if you just go buy something.
September 17th, 2007 at 5:24 am
[…] Climbing the Consumption Ladder Together by KMC @ Advanced Personal Finance. This is a thoughtful commentary on the above article by David. People’s expectations have simply shifted. A perfectly good working refrigerator isn’t good enough anymore. It has to be a gigantic stainless steel one. […]
September 17th, 2007 at 11:06 am
[…] Jones family are we keeping up with, and then Advanced Personal Finance’s response in “Climbing the Consumption Ladder Together“. Both points of view have merit, but as I just said, you’re responsible for all your […]
September 17th, 2007 at 12:38 pm
“A perfectly good working refrigerator isn’t good enough anymore. It has to be a gigantic stainless steel one.”
A slightly off-topic question. What is so special about stainless steel appliances? Is there anything better about them other than just that it’s “fashionable” nowadays. They seem to be a bit impractical in that fingers leave spots on them. So why do people consider them better?
I seriously want to know. Kitchen remodeling project is on my list of things-to-do (have been procrastinating on that for the past few years - both because of my reluctance to part with that much money and the disruption such projects bring), but I haven’t decided on details.
September 17th, 2007 at 7:12 pm
Love your post. Agree with you completely. We are definitely comparing ourselves to those one rung up on the ladder. And they are basically moving up at the same rate we are! (I never thought of the moving up at the same rate part before! So true!)
Sometimes when I watch HGTV it does seems so wrong when they tear out perfectly fine cabinets, appliances, counters, etc. just to put in the latest fashion trends (even though I love decorating myself!). I often think how terrible it would make us look to people in a very poor society.
For me, in the past it was difficult for me to actually determine what I could afford. (That may sound crazy, but I have only recently gotten on the right financial track!) I would look at others and think “well they drive an SUV”, and think that I must be able to afford to.
It is hard to try to NOT keep up with the Jones. But important.
Thanks for a great post!
September 18th, 2007 at 8:25 am
Jennifer, to your point about tearing out perfectly good cabinets. Did you know the second largest component of landfills is construction waste? (Paper is by far the largest).
September 18th, 2007 at 1:05 pm
Very nice post. I like what you write about other people’s consumption affecting us in real ways. The easiest example of that for me is cell phones. Now public phones are disappearing, and people expect you to be accessible. I think another factor is that while we might be able to afford the ipod, the suv or the mcmansion, we want all of them. We see the BMW in the neighbor’s yard, and drive by the new development, and go into our work and see our coworkers’ new gadgets, and it has a cumulative effect.
It would be nice if the government were to incentivize saving. With inflation set to reach high rates, saving is going to be penalized in the next few years if A. Greenspan is right. It seems crazy to me that interest income is taxed even if it is a small amount. Couldn’t there be an exemption for at least the first $1K?
September 18th, 2007 at 2:52 pm
I’ve found a practical and satisfying solution when I’m dissatisfied with the things I own. I clean and repair them. Throwing out the junk and donating stuff I don’t need makes my house look bigger. Washing and waxing my car makes it look and feel newer. It doesn’t cost much, and it makes most of my stuff last longer.
September 18th, 2007 at 11:13 pm
[…] Climbing the Consumption Ladder Together from Advanced Personal Finance […]
September 22nd, 2007 at 8:25 pm
September 28th, 2007 at 10:17 am
[…] Climbing the Consumption Ladder Together by KMC @ Advanced Personal Finance. Same issue of consumption looked at from a totally different perspective. […]
September 28th, 2007 at 6:57 pm
Hi Micah! You’re right, I’m not your wife. My Micah doesn’t read blogs much.
October 2nd, 2007 at 5:49 pm
[…] the story of wasted time and money in Absolutely essential reading! Carnival of Personal Finance Climbing the Consumption Ladder Together Advanced Personal Finance Who do you compare yourself to when it comes to your own conspicuous […]
October 8th, 2007 at 8:07 am
[…] backing from recent research) that it’s because of our social groups. I’ve written that I think conspicuous consumption is driven by comparing ourselves to those slightly above us on the economic […]