Why (Poor) People Buy Luxury Goods

I’ve gotten quite some entertainment out of T.M. Scanlon’s book “Why Does Inequality Matter?”, as it so potently albeit involuntarily shows the utterly myopic thinking of the liberal white educated suburbanite. He cracked me up when he referred to a statement by a poor black woman (p. 30-31) about why she has to have luxury handbags and the latest iPhone. She states that it is necessary because it allows her to enforce her rights in a white bureaucracy. The example she mentions is that her neighbor who wanted to get more money from the government was sent away while she, the noble Shaqueesha from da hood, was able to get welfare benefit payments to that neighbor’s grand-daughter restored. I laughed loudly when I read it, and I laughed even more when Scalon took that statement at face value and waffled that, “for a person who is poor, especially a black person, having certain luxury goods can be crucial to avoid what [some other philosopher] calls status poveryt and agency poverty — crucial to being able to function in society.”

Taleb refers to people like Scanlon “IYIs”, intellectuals-yet-idiots.

Suburbanite white idiocy is not quite the topic of this article, though. Instead, let’s pick apart the behavior of the black woman. First and foremost, what she engages in is some kind of magical thinking. If she brandishes an expensive handbag despite living off food stamps, she is able to get more money from the system, she reasons. Her iPhone, which she cannot afford, is a scepter the sight of which will make lowly government employees hand over wads of taxpayer’s money. Yup, that is one way of looking at it. However, Western countries are relatively free from corruption. If you are entitled to certain benefits, you only have to fill out a form and if you meet the criteria, you’ll get some cash. It is much more likely that Shaqueesha’s neighbor was illiterate and unable to make a coherent request while she is probably at least semi-literate.

The thought that black women buy expensive handbags and iPhones to get more welfare cracked me up quite a bit. Yet, the reason why poor people splurge on those goods is to impress their own kind. She seems to think that if she only blew a grand on the latest fashion item, other poor people would not think that she is poor. With a bit of abstract reasoning you will quickly figure out that all the poor people of her kind may very well think the exact same way, so you end up with a bunch of poor people blowing the little money they have on luxury goods in order to impress other poor people around them and convince them that they are not poor. This would be comical if it wasn’t real life.

I’m only referring to poor blacks because of Scanlon’s example. I am sure that there are many poor black people who exhibit great prudence and could not even imagine blowing their welfare checks on the latest Air Jordans. The same behavior exists among whites as well, even in the middle class. For instance, plenty of people lease cars they can barely afford or they take expensive vacations the loans for which they will pay off for more than a few summers. Weddings are another prime examples. There are people who are paying off their weddings well into their divorce. It’s ridiculous.

In the end, it boils down to stupid wanting to impress others with their money, even if those people don’t have much money themselves. Yet, even people who have money won’t really be impressed by that kind of behavior. If you had a few million in the bank, then some schmo in the office driving a nice car will evoke roughly the same response in you as that schmo gets when he sees someone having slightly upscale food delivered for lunch. But, hey, you only live once, right?

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6 thoughts on “Why (Poor) People Buy Luxury Goods

  1. “We buy things that we don’t need, with money we don’t have, to impress people we don’t like.”

  2. Have you seen this? They call themselves “The Sapeurs.”

    From the description box:

    “In fact, behind the image of success these dandies project, there are often stories of significant financial troubles caused by their extravagant hobby. To afford the price tag of their designer clothes, “sapeurs” have to save, borrow and even steal money, sometimes bringing ruin to their families. But even the grim consequences of their indulgent dressing habits often don’t stop “sapeurs” from spending money they don’t really have. They are in constant competition with each other and investing in their image is more important to them than improving their living conditions. Dressing smartly becomes a true addiction that is very hard to conquer.”

  3. People from all classes are suceptible to this bullshit.

    I remember reading somewhere that winning the lottery causes the risk of bankruptcy of your neighbors to rise somewhat – because suddenly they spend themselves into a hole while trying to keep up with your “upgraded”lifestyle.

    Dont they teach Duesenberrys relative income theory at econ school anymore?

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