The Tyranny of Money

The more things change, the more they stay the same. A human activity almost as venerable as the accumulation and opulent display of vast riches is the condemnation of the accumulation and opulent display of vast riches. People have been busily engaged at each for several millennia now. Both continue in full flower as America races into the twenty-first century with its liberal capitalist democracy ascendant around the world, its rich richer than ever, its less-rich curiously lagging behind. Yet figuring out what, exactly, is wrong with the excessive accumulation and opulent display of wealth, on the one hand, and then deciding what if anything to do about it, on the other, have been among the most troubling issues of social theory and political economy – far harder to pin down than the intuitive sense that something is, indeed, wrong. In his interesting, important, thoughtful, if sometimes wandering, repetitive, and maddening recent book, Luxury Fever, the psychologically-minded economist Robert Frank of Cornell University – coauthor, with Philip J. Cook, of the related Winner Take All Society, another widely accessible and important book – ventures into this familiar domain. Part economics, part social psychology, part autobiography, part cognitive psychology or behavioral economics, part game theory, part evolutionary biology, part tax policy, and part a journalistic foray into the lifestyles of the rich and famous in fin-de siecle America, Luxury Fever offers up both a view of the social problems presented by luxurious living and a specific type of solution to them. In short, Frank argues that much of our spending results from a desire for relative status, leading us to want “positional goods”; since everyone else does likewise, we end up treading water with no improvement in our subjective well-being or utility. We would all be better off if we hopped off the treadmill and directed our limited resources to nonpositional goods, including more savings, leisure, and education, whose benefits endure. Frank argues that a progressive consumption tax can help us all to escape in a “win-win” way from the collective action problem of luxury fever. His description and prescription each deserve to be thought through and taken seriously. Luxury Fever is a good, important book.