Monday, October 15, 2007

Top-Down Class Leveling

The rich live much better than the poor. The middle class live much better than the poor. But the rich do not live much better than the upper middle class. A $50,000 car is much better than a $5,000 car, probably ten times better. But a $500,000 car is not ten times better than a $50,000 car. Positional goods, as Fred Hirsch called them in The Social Limits to Growth, are valued by the rich because they are rare by nature. You can always make a new Rolls-Royce, but you can't make new mountainsides for houses with gorgeous views. But with millions of millionaires in the world now, many positional goods are bid up way past their added value.

The rich are much richer than they used to be. But they are not living that much better. We are leveling the classes at the top.


Michael Kruse said...

This makes me wonder if their isn't an "S" curve to economic growth, much like the "S" curve in population growth with the Demographic Transition. Eventually, the marginal improvement in lifestyle for X amount of dollars spent shrinks and shrinks to the point that most will no longer pursue it. Things stablize at a more even sustainable rate.

I think the sustainable growth movement falsely projects current dyanmics indefinitely into the future.

The Sanity Inspector said...

So that's why I don't see many Maybachs on the road around here...