Critique of conspicuous consumption and economic growth


Jason Collins


November 13, 2012

Last week, I presented my paper on conspicuous consumption and economic growth at the annual PhD Conference in Economics and Business. The basic argument of the paper is that the evolution of the propensity to engage in conspicuous consumption is a factor underlying modern economic growth, as conspicuous consumption requires productive activity to produce the resources to consume.

One of the great features of the conference is that each presenter is allocated a discussant who reviews the paper and presents a critique - and the task is taken seriously. Paul Frijters from the University of Queensland was my discussant, and he made a few interesting points (a copy of his presentation is here).

Frijters’s major criticism is that I should not link the evolution of conspicuous consumption to the Industrial Revolution. This critique suggests that I have done a poor job at framing my argument, as it is not my intention to argue that the evolution of the propensity to signal quality through conspicuous consumption was a specific trigger of the Industrial Revolution. Rather, it provides one of the foundations for the Industrial Revolution to occur - and that foundation could have been laid some time before it.

To move away from the Industrial Revolution, Frijters suggests three alternatives for the paper (the first two as throwaway ideas, the third as a more serious suggestion): 1. Use the model to further dispel the myth that the Industrial Revolution had anything to do with evolutionary selection. 2. Switch from economics to something biological, such as why some animal species don’t signal status and others do. 3. Talk not of changes within a few hundred years, but instead about human sub-populations.

On the first suggestion, evolutionary models can be very fast. The basic model in the conspicuous consumption paper required only 10 or so generations for the take-off. In some ways, it is the Industrial Revolution like take-off in the simulations that gives the impression that we are trying to explain the Industrial Revolution. Even if we rule out conspicuous consumption as a specific trigger, there are plenty of other evolved traits worth considering.

However, I agree with Frijters that looking at human sub-populations will be vital in picking apart this topic. Better demographic data is being developed and I am hopeful that the next few years will see cheaper genome sequencing driving the development of interesting longitudinal data on selection pressure. Ultimately, an evolutionary theory of the Industrial Revolution must stand or fall based on the ability to differentiate between populations that experienced rapid technological growth, and those that did not.

On that point, there is not much evidence of biologically mediated differences in conspicuous consumption between populations - particularly in a way that would support conspicuous consumption as being that specific Industrial Revolution trigger. Conspicuous consumption is relatively ubiquitous, with only the form varying. Cross-population analysis will be more interesting when we consider other economic traits.

As an aside, Frijters has a book coming out next year (with Gigi Foster) - An Economic Theory of Greed, Love, Groups and Networks - that might be worth a look.