Editing Conspicuous consumption (section)

==Criticism==
In 1919, the journalist [[H. L. Mencken]] addressed the sociological and psychological particulars of the socio-economic behaviours that are conspicuous consumption, by asking:<blockquote>Do I enjoy a decent bath because I know that John Smith cannot afford one—or because I delight in being clean? Do I admire [[Beethoven's Fifth Symphony]] because it is incomprehensible to Congressmen and Methodists—or because I genuinely love music? Do I prefer [[terrapin à la Maryland]] to fried liver because plowhands must put up with the liver—or because the terrapin is intrinsically a more charming dose? Do I prefer kissing a pretty girl to kissing a [[charwoman]], because even a janitor may kiss a charwoman—or because the pretty girl looks better, smells better, and kisses better?<ref name="Aggressive Ostentation" /><ref>{{cite book |last1=Mencken |first1=Henry Louis |title=Prejudices, First Series |date=1919 |publisher=[[Alfred A. Knopf]] |location=New York |url=https://www.gutenberg.org/files/53538/53538-h/53538-h.htm}}</ref></blockquote>

=== Inequality and debt ===

In ''The Theory of the Leisure Class'' (1899) Veblen said that "among the motives which lead men to accumulate wealth, the primacy, both in scope and intensity, therefore, continues to belong to this motive of pecuniary emulation of the rich".<ref name="Veblen 1899"/> In the study "Borrowing to Keep Up (with the Joneses): Inequality, Debt, and Conspicuous Consumption" (2020), Sheheryar Banuri and Ha Nguyen reported three findings:

* Consumption tends to increase when the buying and the using of goods and services is conspicuous: Consumption signals status to other people.
* Conspicuous consumption increases the frequency of borrowing money: Poor people take out loans in order to compete at consumption.
* [[Economic inequality]] is worsened with access to credit: Poor people borrow money in order to signal status, which becomes a vicious circle.<ref name=":3">{{Cite journal|last1=Sheheryar|first1=Banuri|last2=Ha|first2=Nguyen|date=2020|title=Borrowing to Keep Up (with the Joneses): Inequality, Debt, and Conspicuous Consumption|url=https://openknowledge.worldbank.org/handle/10986/34351|journal=Policy Research Working Paper|doi=10.1596/1813-9450-9354 |language=English|via=World Bank Group|hdl=10986/34351|hdl-access=free}}</ref>

The findings that Banuri and Nguyen reported indicate that the cyclical effect of borrowing money for conspicuous consumption leads to and perpetuates economic inequality. That poor people imitate, try to match, and emulate the [[consumption (economics)|consumption]] patterns of rich people in order to increase their social status, and perhaps rise in society. That such socio-economic behaviours, facilitated by easy access to credit, generate macroeconomic volatility and support Veblen's concept of [[The Theory of the Leisure Class|pecuniary emulation]] used to finance a person's social standing.<ref name=":3" />

Other research supports these and similar results. For example income inequality has been found to be associated with reduced savings rates.<ref>Michael Kumhof, Romain Rancière, and Pablo Winant, "Inequality, Leverage, and Crises", American Economic Review 105, no. 3 (March 2015): 1217–45, https://doi.org/10.1257/aer.20110683</ref><ref>Michael Kumhof et al., "Income Inequality and Current Account Imbalances” (IMF, 2012), http://ideas.repec.org/p/imf/imfwpa/12-8.html {{Webarchive|url=https://web.archive.org/web/20190421210115/https://ideas.repec.org/p/imf/imfwpa/12-8.html |date=2019-04-21 }}</ref><ref>Christopher Brown, Inequality, Consumer Credit and the Savings Puzzle (Cheltnham: Edward Elgar, 2008)</ref> One hypothesized mechanism for this relationship is 'expenditure cascades'<ref>Robert H. Frank, Adam Seth Levine, and Oege Dijk, "Expenditure Cascades", Review of Behavioral Economics 1, no. 1–2 (January 15, 2014): 55–73, https://doi.org/10.1561/105.00000003.</ref> whereby consumption norms are set by the relatively wealthy, who then have more income and consumption relative to others as inequality rises. This emulation of the consumption norms of relatively wealthy peers is supported by a large literature.<ref>Moritz Drechsel-Grau and Kai D. Schmid, "Consumption–Savings Decisions under Upward-Looking Comparisons", Journal of Economic Behavior & Organization 106 (October 1, 2014): 254–68, https://doi.org/10.1016/j.jebo.2014.07.006</ref><ref>Francisco Alvarez-Cuadrado, Jose Maria Casado, and Jose Maria Labeaga, "Envy and Habits: Panel Data Estimates of Interdependent Preferences", Oxford Bulletin of Economics and Statistics 78, no. 4 (August 1, 2016): 443–69, https://doi.org/10.1111/obes.12111</ref><ref>Marianne Bertrand and Adair Morse, "Trickle-Down Consumption", Working Paper (National Bureau of Economic Research, March 2013), http://www.nber.org/papers/w18883</ref><ref>Peter Kuhn et al., "The Effects of Lottery Prizes on Winners and Their Neighbors: Evidence from the Dutch Postcode Lottery", American Economic Review 101, no. 5 (August 2011): 2226–47, https://doi.org/10.1257/aer.101.5.2226</ref><ref>Marianne Bertrand and Adair Morse, "Consumption Contagion: Does the Consumption of the Rich Drive the Consumption of the Less Rich?.", 2011, faculty.haas.berkeley.edu/morse/research/papers/NBER_reporter_summaryAug2011.pdf</ref><ref>Rachel E. Dwyer, "The McMansionization of America? Income Stratification and the Standard of Living in Housing, 1960-2000", Research in Social Stratification and Mobility 27, no. 4 (December 2009): 285–300, https://doi.org/doi: 10.1016/j.rssm.2009.09.003</ref><ref>Bill Dupor and Wen-Fang Liu, "Jealousy and Equilibrium Overconsumption", American Economic Review 93, no. 1 (2003): 423–28</ref><ref>H. L. Cole, G. J. Mailath, and A. Postlewaite, "Social Norms, Savings Behavior, and Growth", Journal of Political Economy 100, no. 6 (1992): 1092–1127.</ref> 

One complication found in the macro literature is that the link between inequality and savings may depend on context, in particular on the degree of financialisation. When the degree of financialisation is high, inequality tends to reduce the national savings rate as the emulation effect is more powerful when finance is readily available, but the opposite effect may occur when financialisation is low as the emulation effect is weak, and the rich tend to save at a higher rate than the poor.<ref>Peter Bofinger and Philipp Scheuermeyer, "Income Distribution and Aggregate Saving: A Non-Monotonic Relationship", CEPR Discussion Papers (C.E.P.R. Discussion Papers, August 2016), https://ideas.repec.org/p/cpr/ceprdp/11435.html</ref> The effect of inequality on savings is also found to be positive in Asia, where financialization is lower.<ref>inhua Gu et al., "Inequality and Saving: Further Evidence from Integrated Economies", Review of Development Economics 19, no. 1 (February 1, 2015): 15–30, https://doi.org/10.1111/rode.12125</ref><ref>Baomin Dong, and Bihong Huang, "Inequality, Saving and Global Imbalances: A New Theory with Evidence from OECD and Asian Countries", The World Economy 38, no. 1 (January 1, 2015): 110–35, https://doi.org/10.1111/twec.12188.</ref> The relationship is also found to depend on economic policy and institutions. For example inequality appears to lower savings in [[Market Economy|market economies]] but to rather reduce aggregate demand in [[Planned Economy|planned economies]].<ref>Jan Behringer and Till van Treeck, "Varieties of Capitalism and Growth Regimes: The Role of Income Distribution", IMK Working Paper, IMK Working Paper (IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute, 2018), https://ideas.repec.org/p/imk/wpaper/194-2018.html</ref>  

In the case where inequality lowers savings, and increases leverage and a tendency to run large current account imbalances via the expenditure cascade mechanism, this has been associated with more frequent and/or severe economic crisis.<ref>Cristiano Perugini, Jens Hölscher, and Simon Collie, "Inequality, Credit and Financial Crises", Cambridge Journal of Economics 40, no. 1 (January 1, 2016): 227–57, https://doi.org/10.1093/cje/beu075</ref><ref> Malinen, "Does Income Inequality Contribute to Credit Cycles?", Journal of Economic Inequality 14, no. 3 (2016): 309–25, https://doi.org/10.1007/s10888-016-9334-6</ref><ref> J. Michell, "Income Distribution and the Financial and Economic Crisis", in The Demise of Finance-Dominated Capitalism: Explaining the Financial and Economic Crises, ed. Eckhard Hein, Daniel Detzer, and Nina Dodig (Cheltenham, UK ; Northampton, MA, USA: Edward Elgar Pub, 2015)</ref><ref>Michael Kumhof, Romain Rancière, and Pablo Winant, "Inequality, Leverage, and Crises", American Economic Review 105, no. 3 (March 2015): 1217–45, https://doi.org/10.1257/aer.20110683</ref><ref>Michael Kumhof, Romain Ranciere, and Pablo Winant, "Inequality, Leverage and Crises; The Case of Endogenous Default", IMF Working Papers (International Monetary Fund, December 17, 2013), https://ideas.repec.org/p/imf/imfwpa/13-249.html {{Webarchive|url=https://web.archive.org/web/20180918111455/https://ideas.repec.org/p/imf/imfwpa/13-249.html |date=2018-09-18 }}</ref><ref>Fadhel Kaboub, Zdravka Todorova, and Luisa Fernandez, "Inequality-Led Financial Instability", International Journal of Political Economy 39, no. 1 (Spring 2010): 3–27</ref><ref>Richard Breen and Cecilia García-Peñalosa, "Income Inequality and Macroeconomic Volatility: An Empirical Investigation", Review of Development Economics 9, no. 3 (2005): 380–98</ref><ref>Andrew G. Berg and Jonathan D. Ostry, "Inequality and Unsustainable Growth: Two Sides of the Same Coin?", IMF Staff Discussion Notes (IMF, April 8, 2011), http://www.imf.org/external/pubs/ft/sdn/2011/sdn1108.pdf.</ref>