Pan-Racial Bling, and Martin Scorcese's Blow for the Supply-Siders

Do black people spend too much of their money on shiny crap?

Bill Cosby thinks so. $200 for sneakers? No problem. $200 for SAT prep? Not this month.

But something about the Coz's reasoning always bugged me. Maybe it was because my high school was almost evenly split among blacks, whites, and Hispanics, and every morning in the student parking lot, you could see each community displaying their immense wealth in their own fabulous ways.

Thorstein Veblen had the thought to coin this phenomenon "conspicuous consumption," 100 years before mainstream hip-hop turned stupid and corrupt.

Thankfully, we have modern research methods to suss out the truth: According to some fancy professors with a lot of books and computers and stuff, blacks and Hispanics do spend a higher percentage of their incomes on glitter:

Blacks and Hispanics spend up to 30% more than whites of comparable income on visible goods like clothing, cars and jewelry, the researchers found... To do that, they spent less on almost all other categories except housing, and they saved less.

Visible items are those others can see when one is in public. The researchers found that blacks and Hispanics do not spend more than whites on items, such as home furnishings, that could serve as status symbols but aren't seen by as many people.

But... wait for it... there's a twist!

While Roussanov and his colleagues acknowledge that cultural preferences may play a role in these spending choices, they tested that theory by subdividing blacks, Hispanics and whites by income level and state of residence. This caused the differences in spending patterns to disappear. What really matters, Roussanov, Charles and Hurst found, is not one's race but one's economic situation relative to the "reference group" -- people in the immediate community.

Poor blacks and poor whites both spend more on visible goods if they live in poor communities, because such spending gives them more status relative to others in the community. But poor blacks and poor whites living among wealthier people do not devote extra portions of income to visible expenditures, since they are too far behind to get more status from the extra spending they can afford...

Blacks and whites appear to have different spending habits only because blacks tend to be concentrated in poor communities more than whites, Roussanov says.

So there you have it. Poor people who live among other poor people spend more on looking not-poor. And it's still nearly impossible for poor communities to get wealthier when it's dedicating so much of its income to useless items of ethereal value. So Cosby's not wrong. He's just grumpy.

***

Now here's a question for the gated community across town. Which movie has contributed the most wealth to America? If you're a supply-sider, you'd have to say Taxi Driver.

Follow this thread: Scorcese makes Taxi Driver, which inspires John Hinckley to shoot Ronald Reagan to impress Jodie Foster. Reagan's personal popularity skyrockets, cowing the Congressional Democratic majority from stopping Reagan's tax cuts. The resulting deficit spending saves the American economy and leads to 25 years of prosperity.

I always wondered what right-wing economists talked about when they were stoned. Except for the supply siders' premise that we're still enjoying the fruits of the Reagan Revolution (we're always on the right side of the Laffer curve, aren't we, you soulless rich assholes?), it's an interesting answer to the question.

Now if we can take the radical action required to prevent utter catastrophe, we could bestow similar credit to An Inconvenient Truth.

***

Finally, if you have Showtime, you have no excuse for failing to watch This American Life. Holy crap, is it good.

Comments

[mlo]

whoa. you just blew my mind.

[Andrea]

Re: conspicuous consumption by minorities. The "Cosby" observation has been around for as long as grandpas have been racist. I heard that years ago. The problem with your analysis is that it assumes that if blacks/minorities would just buy cheaper shoes and put the rest in a savings account, they'd have enough to go to college, warranting the SAT prep course. But when your overall options are limited, and the difference in the money you could save would not improve those options, then why not spend money that improves your social status and possibly your short-term self-esteem?

And its not (solely) racial or geographical. We have a mortgage of over $600000. If I have an extra $100 bucks at the end of the month, I am not really going to pay extra on our mortgage even if it makes economic sense to do so. I will probably buy a couple bottles of wine or a cute shirt, things that are valued among my friends and neighbors.

[TreeHead]

I have always loved Ira Glass's show on NPR. I didn't know there was a video version. Thanks for the heads up. Do we get Showtime??? I'll have to find out - or buy from iTunes.

[Desi]

Finally!! I've been waiting years for this!

Seamus, shouldn't that be "useless items of ephemeral value" and not "useless items of ethereal value"?

And oh yes, terrific post. Just love the way you are able to weave Taxi Drive and the Laffer Curve into the same thought.

[chris]

I loved this post