"Luxury Fever"

Paper Summary:

This paper is about the book, "Luxury Fever", by Robert Frank. The book discusses our recent increase in luxury spending. Frank describes how an increase in luxury spending by the extremely rich has caused lower classes to spend more in an attempt to "keep up". This has caused lower rates of saving over time, and Frank concludes that luxury goods do not make us any happier overall. Frank suggests that, in order to curtail luxury spending, we impose a tax on consumption instead of on income.

From the Paper:

"In his book, Luxury Fever, Robert Frank outlines the problems surrounding our recent consumer trends. He believes the constant growth of consumption in increasingly lavish luxury goods satisfies our natural urges to succeed relative to those around us, but in doing so undermines our best interest as a whole and leaves us depleting our savings just to "keep up with the Jones". His solution is a tax on consumption, to effectively take some of that money spent on conspicuous consumption, which he claims neither makes us happier individually nor better off as a society, and give it to the government to spend on inconspicuous consumption. The tax would more importantly encourage personal savings, a phenomena quickly waning under the social pressures to purchase the next big ticket item. While Frank's assessment of the problem may have its occasional merits, his proposed solution causes more problems than it solves. Though there are flaws in both the proposition and the logic leading up to it, Frank's overall complaint does have worth; would we not be better off if we could simply all spend less?"

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