Thursday, November 27, 2014

Why Pay More?

PRINCETON – When Radosław Sikorski, Poland’s foreign minister, went to Ukraine for talks last month, his Ukrainian counterparts reportedly laughed at him because he was wearing a Japanese quartz watch that cost only $165. A Ukrainian newspaper reported on the preferences of Ukrainian ministers, several of whom have watches that cost more than $30,000. Even a Communist member of Ukraine’s parliament, the Rada, was shown wearing a watch that retails for more than $6,000.

The laughter should have gone in the opposite direction. Wouldn’t you laugh (maybe in private, to avoid being impolite) at someone who pays more than 200 times as much as you do, and ends up with an inferior product?

That is what the Ukrainians have done. They could have bought an accurate, lightweight, maintenance-free quartz watch that can run for five years, keeping virtually perfect time, without ever being moved or wound. Instead, they paid far more for clunkier watches that can lose minutes every month, and that will stop if you forget to wind them for a day or two (if they have an automatic mechanism, they will stop if you don’t move them). In addition, the quartz watches also have integrated alarm, stopwatch, and timer functions that the other watches either lack, or that serve only as a design-spoiling, hard-to-read effort to keep up with the competition.

Why would any wise shopper accept such a bad bargain? Out of nostalgia, perhaps? A full-page ad for Patek Philippe has Thierry Stern, the president of the company, saying that he listens to the chime of every watch with a minute repeater that his company makes, as his father and grandfather did before him. That’s all very nice, but since the days of Stern’s grandfather, we have made progress in time-keeping. Why reject the improvements that human ingenuity has provided to us? I have an old fountain pen that belonged to my grandmother; it’s a nice memento of her, but I wouldn’t dream of using it to write this column.

Thorstein Veblen knew the answer. In his classic The Theory of the Leisure Class, published in 1899, he argued that once the basis of social status became wealth itself – rather than, say, wisdom, knowledge, moral integrity, or skill in battle – the rich needed to find ways of spending money that had no other objective than the display of wealth itself. He termed this “conspicuous consumption.” Veblen wrote as a social scientist, refraining from rendering moral judgments, though he left readers in little doubt about his attitude toward such expenditure in a time when many lived in poverty.

Wearing a ridiculously expensive watch to proclaim that one has achieved an elevated social standing seems especially immoral for a public official in a country where a significant portion of the population still lives in real poverty. These officials are wearing on their wrists the equivalent of four or five years of an average Ukrainian’s salary. That tells Ukrainian taxpayers either that they are paying their public servants too much, or that their public servants have other ways of getting money to buy watches that they would not be able to afford otherwise.

The Chinese government knows what those “other ways” might be. As the International Herald Tribune reports, one aspect of the Chinese government’s campaign against corruption is a clampdown on expensive gifts. As a result, according to Jon Cox, an analyst at Kepler Capital Markets, “it’s no longer acceptable to have a big chunky watch on your wrist.” The Chinese market for expensive watches is in steep decline. Ukrainians, take note.

Wearing a watch that costs 200 times more than one that does a better job of keeping time says something else, even when it is worn by people who are not governing a relatively poor country. Andrew Carnegie, the richest man of Veblen’s era, was blunt in his moral judgments. “The man who dies rich,” he is often quoted as saying, “dies disgraced.”

We can adapt that judgment to the man or woman who wears a $30,000 watch or buys similar luxury goods, like a $12,000 handbag. Essentially, such a person is saying; “I am either extraordinarily ignorant, or just plain selfish. If I were not ignorant, I would know that children are dying from diarrhea or malaria, because they lack safe drinking water, or mosquito nets, and obviously what I have spent on this watch or handbag would have been enough to help several of them survive; but I care so little about them that I would rather spend my money on something that I wear for ostentation alone.”

Of course, we all have our little indulgences. I am not arguing that every luxury is wrong. But to mock someone for having a sensible watch at a modest price puts pressure on others to join the quest for ever-greater extravagance. That pressure should be turned in the opposite direction, and we should celebrate those, like Sikorski, with modest tastes and higher priorities than conspicuous consumption.

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    1. Portrait of Keith Roberts

      CommentedKeith Roberts

      Although I share Singer's disgust at ostentatious displays of wealth, I think the morality of such activities is, to say the least, complicated. Leaving aside the corruption issue, is a rich and ostentatious man like, say, Larry Ellison to be condemned as compared to a Bill Gates? I think we all like Gates more, and believe he contributes more to the welfare of society, but is that a moral matter? An Ellison, after all, is providing jobs to many people as he throws his wealth around. Renaissance princes created much of great and lasting beauty when they hired Michelangelo, Raphael, and the like, at great contemporary expense, or built lovely buildings. Did St. Francis, who came from a similar background as those princes, do more good for the world?

    2. Portrait of Ingmar Schumacher

      CommentedIngmar Schumacher

      Nice article questioning the common sense of relative consumption. BUT - if it makes some people happier and noone worse off, then where is the problem? I am missing the philosophical touch here. An argument really against relative consumption. Concerning this, I noted some thoughts down here: Thanks for any comments!

    3. CommentedLeo Arouet

      Siempre ha sucedido eso cuando muchos políticos gastan el dinero sólo por ostentar. Eso pasa ahora en China y en todo el mundo se encuentra ejemplos de ello. Los hijos de los políticos chinos hacen gala de sus autos lujosos como los lamborghini y maserati, mientras su pueblo sobrevive a duras penas. Interesante artículo...

    4. CommentedKaleem Alam

      Prof. Singer's point is perfect, but example taken is rather simple. there are complicated decision making with brands and choice of quality. I think if people start compromising with prices and willing to go for better for lesser, the prices of many things would fall including sea side high rises and villas. But only “if”.

    5. CommentedDominic Albino

      This sentence seems to contradict itself: "Veblen wrote as a social scientist, refraining from rendering moral judgments, though he left readers in little doubt about his attitude toward such expenditure in a time when many lived in poverty."

    6. CommentedDan Adams

      I understand and agree but its all rather obvious. Rather than telling us the obvious it would be better to delve into the psychology of a man who needs to show off his watch.

    7. CommentedFaruk Timuroglu

      Just they want to be different. In what way? Wouldn't be nice to say. Conspicuous consumption is some trillions of dollars business and will continue to be, as long as some people get much more than their merit it.

    8. CommentedDavid Kelland

      This article is not "rubbish" and does not miss "the main point" of corruption in Ukraine. Professor Singer is taking it for granted that his readers know the former USSR is rife with corruption. Singer has, however, made an argument about conspicuous consumption that is broader because it could easily apply to justly earned income in the West. Everybody knows that corruption (theft) is immoral. Many people, however, view foolish spending as a person's right, despite the great suffering implicitly following from that spending. Singer, in addressing that second view, is making a more meaningful moral argument.

    9. CommentedRocio L. Barrientos

      This is a great article so powerful and simple at the same time. The points that Professor Singer makes can be applied to many countries in the world, including my own (Bolivia). I admire the courage and the power of his words, they touch the deepest cords in one's own mind and heart.

    10. CommentedDan Adams

      This article is rubbish. It misses the main point that new money Ukrainians have all this money because they have fleeced it. Sikorski might actually care about his country more than his watch.

        CommentedMichael Lynch

        The main point has nothing to do with Ukrainians. Singer just used the Ukrainian politicians as an example of ostentation. His argument was that we should celebrate those, like Sikorski, with modest tastes and higher priorities instead of conspicuous consumption.