Luxury Fever: Why Money Fails to Satisfy in an Era of Excess

Frank, a professor of economics at Cornell and the author of The Winner-Take-All Society, castigates Americans for wasteful spending and offers reasonable, if unexciting, policy proposals to remedy the problem. Our homes, cars and even our watches are flashier than ever. But although the rich have the money to indulge their whims, the rest of us finance our spending sprees either by decreased personal savings or by increased debt: Frank reports that total household debt grew from 56% of disposable income in 1983 to an astonishing 81% by the beginning of 1995. Most economists accept that conspicuous consumption merely reflects Adam Smith's dictum that the sum of individuals seeking their own interest adds up to the greatest good for all. But Frank argues that our notions of self-interest are skewed, that all this getting and spending doesn't even make us happy (if your neighbor didn't buy the new Lexus, you wouldn't feel the need for the newer Beemer, and you'd both work less and spend more time with the kids). The problem, Frank believes, is that American society has a glut of individual incentives and a dearth of group incentives. To protect us from our greedier selves, Frank lobbies for a tax exemption for savings and a progressive consumption tax. If Americans spent less on luxury items, he writes, there would be more money available ""to restore our long neglected public infrastructure and repair our tattered social safety net."" Frank's diagnosis of American luxury fever is hard to dispute, but his remedies, sensible in the abstract, take insufficient account of the political and cultural obstacles that need to be overcome to implement them. (Feb.)