Wednesday, January 16, 2008

Veblen Goes Ghetto

During the discussion in ECON 293/493 on Monday, one student hinted that conspicuous consumption is running rampant among poor black Americans. Does this stem from Black American culture? Maybe not.
In the racially divided society we live in, whites are trying to impress other whites, and blacks are trying to impress other blacks. But because poor blacks are more likely to live among other poor blacks than poor whites are to live among other poor whites, poor black families are more susceptible to being pulled into a signaling game with their neighbors.

As the article admits, these ideas are not new. Economist Thorstein Veblen was very much interested in conspicuous consumption.


Senor Naugle said...

Although he doesn't mention fancy tire rims, Michael Shermer in the liberal LA Times wrote this week that Homo economicus is debunked and people are irational. Instead, he argues that people act upon emotions and feelings... such as an innate emotional need for "reciprocal altruism.":,0,1195880.story?coll=la-opinion-rightrail

I suppose this is another example of people being subjective when using the term "rational."

Will Luther said...

"This result is one among thousands of experiments in behavioral economics, neuroeconomics and evolutionary economics conclusively demonstrating that we are every bit as irrational when it comes to money as we are in most other aspects of our lives."

One problem with this type of experiment is that they take place in labs...

I do not think that I am completely rational. How could I be in a world of limited information? But this does not make me irrational. I, like everyone else, have developed many tricks in order make rational decisions (without doing all the number crunching). When you put me in a lab, though, I do not have those guides. So I am left trying to make decisions in a way that I am not use to making them.

Milton Friedman once compared the actions of humans and the science of economics with the actions of a pool player and the science of physics. Sure, pool players are not solving physics equations at the table. But they have developed strategies to make damn close guesses. So when I go to the super market, I do not bring my calculator. I just eye it. And most of the time, I nail the shot.