John Tierney recently wrote a piece in the New York Times that asks an interesting question and then gives a poor answer to it:

Why does a diploma from Harvard cost $100,000 more than a similar piece of paper from City College? Why might a BMW cost $25,000 more than a Subaru WRX with equally fast acceleration? Why do “sophisticated” consumers demand 16-gigabyte iPhones and “fair trade” coffee from Starbucks? {…}

Sometimes the message is as simple as “I’ve got resources to burn,” the classic conspicuous waste demonstrated by the energy expended to lift a peacock’s tail or the fuel guzzled by a Hummer. But brand-name products aren’t just about flaunting transient wealth. The audience for our signals — prospective mates, friends, rivals — care more about the permanent traits measured in tests of intelligence and personality, as Dr. Miller explains in his new book, “Spent: Sex, Evolution and Consumer Behavior.”

Well, sometimes it is. Sometimes the message is something else. Sometimes it’s not a message at all. Clearly, conspicuous consumption is something that does go on every day. And when people pay extra for goods for signaling, they should look into themselves and ask why it is that they are doing that and whether or not it is really worth the “resources.” Particularly if the cost is coming at the expense of economic security.

But I think that there is the tendency of a lot of people to assume that anything that they don’t personally see the value in as a conspicuous or positional purchase. It’s no surprise that I first ran across this article by way of Half Sigma, who spends significant amounts of time trying to differentiate between that which he personally values (and thus is a natural good) and that which he does not value (and thus is a social ill).

No doubt some people that buy “fair trade coffee” do so ass a signaling device. Indeed, the people most likely to point out that they buy said coffee are the people most likely to be signalling. However, a lot of people buy it because it’s something that they believe in or because it’s an easy way to feel better about themselves. It’s not all that different from “Buying American.” Both are purchases that do little on the individual level but that people that get involved in these buying strategies believe would make the world a better place if more people did the same.

I see a similar dynamic when it comes to houses. I’m told that people buy bigger houses to signal their wealth and that it’s a wasteful, positional buy. Sometimes maybe it is. But you know what? For a lot of people, having that extra space is handy. A room for each kid was actually one of the few things that my mother-in-law insisted on when they moved when Clancy was six or so. She and I are not big on conspicuous, signalling, or positional consumption (more on this in a minute), but having a bigger house is one thing that we are going to spend money on.

Of course, when we do so, no doubt people could point to it and say that it really was about positioning and signalling. They could argue that it is mostly about neighborhood (positioning), for instance. Except that where we live, we don’t expect there to be the urban/suburban divide that exists where were were raised or where we live now. But to be honest, if we did live in an urban area, neighborhood would be important. That being said, living in a nice neighborhood has value apart from how we are seen.

But ultimately there is no way that we could argue that signaling is not a factor even when it isn’t. Everything we buy can be psychoanalyzed as having been about that. When I was looking at cars recently, I was looking at cheap and small cars. Was this because I am thrifty and value good gas mileage? I would say so, but someone else could say that what I really want is simply to signal my “thriftiness” as a point of self-determined superiority. That I buy cheap clothes is conspicuous in its own way by being all authentic and crap and that has social currency all its own.

This is one of the problems I have with discussions about how “most” people spend money to impress people (when they can). It’s non-falsifiable. There is almost no purchase which won’t be considered by someone, somewhere to be a signalling mechanism. This is particularly true any time anybody chooses to spend more money than is absolutely essential.

I don’t own an iPhone, but I do own one of its less expensive competitors. Denigrating the iPhone as a wasteful purchase may make me feel better, but in the end if I had more money, less mistrust of Apple, and more exposure to the product when it came time to buy a product, it’s likely that I would own one. The “16-gigabytes” in the “16-gigabyte iPhone” mentioned in the article is not just some marketing gimmick akin to “52-speed CD-ROM” back in the day, it is something that has actual value that a lot of people may have or be able to find use for!

Of course, that is lost on someone whose main gripe with their current phone is the inability to make calls from the kitchen. And that’s fine. But that the kitchen caller does not see the need or use for a phone with a substantial OS or hard drive space does not mean that it was bought to impress them. And of course it won’t impress them. So then Miller and company get to turn it around on its head and say “A-ha! These purchases don’t work!”

I fall into this trap myself. I see a decked out car and say to myself “Oh, give me a break.” That’s because I don’t see the value in an expensive car. Not because the car has no value. Maybe there is absolutely no difference between the BMW and Subaru WRX. I suspect that there is, though. I also suspect that I would look at the differences and say “Wait, that’s not even remotely worth $25,000.” Which to me it isn’t. But my upgrade from a smartphone with QVGA graphics to one with VGA would be similarly lost on a lot of people.

But sure, sometimes (maybe usually) a BMW is a status buy. Even then, it’s far from clear that it’s inherently an unsuccessful one. I wouldn’t impress anyone if I went out and bought one, but I’m not the target audience. I don’t live in a place where such things matter. But there are certainly places where pulling up in my Ford Escort would raise some eyebrows and not in a good way.

But the bigger place of effectiveness is not in the raising of eyebrows, but rather in the realms of the unconscious. People will often say that they don’t care what kind of car a person drives, but they may be lying or they may not realize that they’re lying. It’s sort of like how when I was growing up it was a popular thing to say that we prefer girls without make-up. It was a way to establish ourselves as unsuperficial and so an easy social marker, but it was also something we thought was true. But we associated make-up with those girls that caked it on. What we didn’t realize were the fact that girls that actually knew how to apply it were grabbing our attention in ways and frequency that they might otherwise not. We will tell ourselves that we don’t care whether a person is wearing designer clothes or driving a super-file automobile, but what’s really going on is that we don’t notice the ways that we actually notice.

In any case, I’ve become increasingly suspicious about broad-stroke explanations for the behaviors of others where the moral of the story is that the world would be a better place if more people were like the person explaining how others are.

That’s absolutely not to say that the world wouldn’t totally be a better place if more people shared my priorities. It totally would.