Inequality, Luxury, Rawls and Hayek

Ezra Klein reconsiders the wisdom of high luxury taxes:

[Taxes on luxury goods] mainly just lowered consumption, put yacht builders out of work, and pissed people off. To some extent, these effects don't bother me as I want to depress consumption of luxury items, but insofar as taxing the rich goes, revenues, and not quirky theories about positional competition, should probably be the aim.

Julian Sanchez responds, accusing Ezra of Harrison Bergeron-style destructive envy, and Ezra rejoinders, accusing Julian of hating poor sick children and black people.

I think both are missing something here: there are good Rawlsian, Difference Principle reasons to support luxury consumption, which override the unpleasantries of envy in the poor and boastful pride in the rich. Good ol' Ludwig von had this to say on the subject:

Many foolish things have been said and written about luxury. Against luxury consumption it has been objected that it is unjust that some should enjoy great abundance while others are in want. This argument seems to have some merit. But it only seems so. For if it can be shown that luxury consumption performs a useful function in the system of social cooperation, then the argument will be proved invalid. This, however, is what we shall seek to demonstrate.

Our defense of luxury consumption is not, of course, the argument that one occasionally hears, that is, that it spreads money among the people. If the rich did not indulge themselves in luxuries, it is said, the poor would have no income. This is simply nonsense. For if there were no luxury consumption, the capital and labor that would otherwise have been applied to the production of luxury goods would produce other goods: articles of mass consumption, necessary articles, instead of “superfluous” ones.

To form a correct conception of the social significance of luxury consumption, one must first of all realize that the concept of luxury is an altogether relative one. Luxury consists in a way of living that stands in sharp contrast to that of the great mass of one’s contemporaries. The conception of luxury is, therefore, essentially historical. Many things that seem to us necessities today were once considered as luxuries. When, in the Middle Ages, an aristocratic Byzantine lady who had married a Venetian doge made use of a golden implement, which could be called the forerunner of the fork as we know it today, instead of her fingers, in eating her meals, the Venetians looked on this as a godless luxury, and they thought it only just when the lady was stricken with a dreadful disease; this must be, they supposed, the well-merited punishment of God for such unnatural extravagance. Two or three generations ago even in England an indoor bathroom was considered a luxury; today the home of every English worker of the better type contains one. Thirty-five years ago there were no automobiles; twenty years ago the possession of such a vehicle was the sign of a particularly luxurious mode of living; today in the United States even the worker has his Ford. This is the course of economic history. The luxury of today is the necessity of tomorrow. Every advance first comes into being as the luxury of a few rich people, only to become, after a time, the indispensable necessity taken for granted by everyone. Luxury consumption provides industry with the stimulus to discover and introduce new things. It is one of the dynamic factors in our economy. To it we owe the progressive innovations by which the standard of living of all strata of the population has been gradually raised.

The importance of this point cannot be overemphasized. The concept of luxury goods, like most concepts in economics, is not static; rather, to understand the concept, we must look at changes over time. And even moreso than Mises, Hayek's entire life work can be seen as a rejection of the static and a focus on intertemporal coordination. Writes Peter Boettke,

At one point in the interview I tried to explain the unity in Hayek's research program from his first works on imputation to his efforts in law, politics and sociology. The common thread, I argued, was Hayek pre-occupation with intertemporal coordination, and his method was both to increase the complexity of the problem situation in which coordination takes place and focus more on the institutional background that enables coordination. Hayek's revolutionary contributions in economics were tied to his focus on the coordination of economic activities through time.

That said, where's my fucking yacht already?

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Klein expresses evil desire

these effects don't bother me as I want to depress consumption of luxury items

Technically, that's an evil desire, which if put into practice would constitute an evil act. Klein is saying he is not bothered by the use of force to harm a certain class of people - he seems to suggest that he actually wants to use force for this (his words are "I want to"). Klein then attempts to regain the moral high ground by employing against Sanchez the tired, boilerplate lies that the left tell about their opposite numbers.

I don't think it's an evil

I don't think it's an evil desire to object to status competition on the grounds that it's zero-sum, and that the duality of envy vs. pride often results in social conflict. Nor does it necessarily require evil acts to reduce status competition; one can do so through persuasion, shunning, and other peaceful social norms. Again, like in the thread about capitalism and socialism, it's important to distinguish between legitimate concerns and illegitimate means of addressing those concerns.

Nor do I

I don't think it's an evil desire to object to status competition on the grounds that it's zero-sum

Nor do I, but that was not what I was calling evil. I tried to be pretty specific. Klein was talking about taxation. Which is the application of force.

I embarrass myself by making statements so blindingly obvious that I expect people to say, "so, dimwit, you found that out just now did you?" But instead, people actually contradict me. Tomorrow I will claim that Mount Rushmore will not fit inside a Toyota Camry. Will I be contradicted?

I read Ezra's "these effects

I read Ezra's "these effects don't bother me" as a statement about ends, not means.

Fair enough

OK. It could be taken that way, though that is not my sense of it.

I don't think it's an evil

I don't think it's an evil desire to object to status competition on the grounds that it's zero-sum, and that the duality of envy vs. pride often results in social conflict.

I do. Status is a good case of "they can not hurt you unless you let them." Food can be said to matter in a an absolute sense because if you don't eat, you will die. Not so for status. That said, the ubiquitous emphasis on status can give high-status people a privilege that they might not have without the status (i.e., they don't have their status because they generate a lot of value, they have it because they, uh, wear nice jeans or something), so perhaps I'm being unreasonable. But it's pretty easy to come by an amount of status which would make you pretty darn wealthy in absolute terms --- i.e., get a bachelors in one of the hard, applied sciences, and maintain a good GPA. So I just can't feel that strongly about status in a good/evil sense.

It does piss me off, though. I feel very strongly about it in a stupid/enlightened sense, but I just can't quite get to the point of feeling that stupidity is evil (more like punishment in my book). I find status games eminently distasteful, but perhaps a useful reminder of our simian substructure.

Positive Sum

I don't think it's an evil desire to object to status competition on the grounds that it's zero-sum, and that the duality of envy vs. pride often results in social conflict.

Well, if wealth was a zero-sum situation, maybe. But it's not, so we might as well say "I don't think it's an evil desire to object to status competition on the grounds that it makes everyone break out in hives and howl at the moon and sing show tunes." Wealth is accrued by satisfying someone else's needs and desires. Absent force and fraud, wealth is positive-sum. As to envy, it's far better to try and teach people to be less envious than to try to remove their causes of envy. Actually, I'd settle for stopping widespread encouragement of envy rather than actually trying to rein it in.