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Veblen goods
- Sohcahtoa82 8y agoI've never understood the desire to own things like Rolex watches. It's a watch. It tells you what time it is. You can get a pretty durable one that'll last you nearly a lifetime for under $100, especially if you get a digital one since there's no moving parts to break. So why spend $5,000+ on one? I mean, yeah you might want to get something fashionable and shiny, but that doesn't require a $5,000 purchase. I feel that the only reason to spend $5,000 on a watch is so that you can show off to other people that you can afford to piss away $5,000 on a watch, which is just silly.
- ghaff 8y agoI'm more of $30 Timex guy myself for day-to-day wear. But there are people who appreciate the craftsmanship associated with high-end watches. There also is such a thing as fashion which I don't personally much care about (within reason) but many do. Most people who have some amount of money spend it on things that aren't strictly utilitarian.
- moate 8y agoYou're all fools! All you need is a good stick and the sun's light and you can tell the time of day! Wasting 30 dollars on a watch! Joking aside, there are people who refuse to ascribe anything BUT utilitarian value to things as a sort of anti-consumerist view. Going to be hard to convert them.
- TheOtherHobbes 8y agoExpensive mechanical watches don't work very well. For all the marketing written about craftsmanship and history and so on, the harsh truth is that they're not nearly as good as keeping time as a cheap digital watch with a quartz crystal. (Casios are rated between and 1 and 0.5 secs/day, while a Rolex Chronometer is rated to 2 secs/day. High end quartz watches that cost thousands can be rated to 5 secs/yr. Of course a phone that supports NTP on a network should be at least as accurate as that.) So the only reason for buying an expensive watch is to signal that you can afford an expensive watch. And if you're going to do that, you might as well have a piece of solid gold surgically implanted in your forehead. If that's ridiculous - and it is - why is it any more ridiculous than spending tens or hundreds of thousands buying a watch that may well be ugly, inelegant, bulky, or even vulgar, and isn't even outstandingly good at being a watch?
- Fins 8y agoDoes 2 seconds a day vs. 1 second a day really matter to you, or most people? There certainly is signaling for many people's purchases of high-end watches (moreso with Rolexes which are easily recognizable compared to some "better" or more expensive brands... Pateks generally are quite understated) but some people appreciate the esthetics, or the intricacy of the mechanics. And really, if you do have money, is it really different from collecting stamps (even less utilitarian value, generally) or classic cars (yeah, you can get from point A to point B, but with far less comfort and safety than in a modern econobox) or anything else? Not everything in the world is about purely utilitarian value.
- moate 8y agoIt's jewelry. Earrings serve even less function than a watch, and can cost even more. shrugs Gotta find something to spend that money on?
- saalweachter 8y agoWhat, you need a stick? :-) (In all seriousness, one of the most common ways I check the time, besides my phone unlock screen, is checking how much sunlight I have left by the "1 hand above the horizon = 1 hour" method.)
- jpao79 8y agoMy take is that its basically a branded bitcoin with some personal utility and personal luxury component mixed in. There is a built-in hope that there will be a larger audience for these products (i.e. more globally affluent consumers, etc.) who will drive the price up and that it is sufficiently resource intensive (labor in this case) to build new ones.
- jadell 8y ago> I feel that the only reason to spend $5,000 on a watch is so that you can show off to other people that you can afford to piss away $5,000 on a watch There are social and political circles in which demonstrating the ability to piss away money without caring is the only way to rise in status/power. You think it's silly, and from a standpoint of pure utility, that may be true. But it doesn't make it less important to the people who move in those circles.
- atomical 8y agoThat sounds like it applies to most engagement rings.
- rgrieselhuber 8y agoIf you try one on it might change your opinion.
- ggg9990 8y agoIt might, but I tried on a Patek Philippe and the supposed “mystique” simply wasn’t there. It’s a watch. Big deal.
- jasode 8y ago>It's a watch. It tells you what time it is. I'm not a fancy watch buyer but I'll try to explain some of the thinking. To luxury buyers, it's not a "watch". Instead, it's "jewelry for the wrist that just happens to tell time." Therefore, explaining the technical superiority of the quartz crystal accuracy of a $10 Casio watch compared to the mechanical springs of a Rolex watch is an ineffective critique. It's not even relevant that the Rolex keeps time less accurately.
- zeth___ 8y agoIt's a status symbol. To them the Rolex is like a code base written in idiomatic Haskell, the Casio is a code base for a pet shop written in php sprinkled across a dozen html files.
- jacobevelyn 8y agoFor what it's worth, my $9 bright pink Casio has netted me more compliments over the past six years (and it's still using the original battery!) than probably every other accessory/item of clothing I've worn over that time combined.
- TheOtherHobbes 8y agoThat's a different kind of signalling, for a different demographic with different values.
- Sohcahtoa82 8y ago> To luxury buyers, it's not a "watch". Instead, it's "jewelry for the wrist that just happens to tell time." That's probably the best description I've seen for appreciation of expensive watches. FWIW though, if you were to wear a knock-off of a luxury brand with your fancy suit at some event, would anyone even notice without taking a close look to specifically examine your watch?
- dagw 8y agoDepends a lot on the knock off. Some are terrible. I have a colleague that wears an "Omega" that is laughably bad. Some of the better ones though are much harder to spot.
- eximius 8y agoI tend to agree, to a point. My wife got me what I would consider an expensive watch (~$600) as a single present for several 'events'. I love it because it is an insanely thin and light watch, so it is very comfortable to wear. The craftsmanship is amazing and you wouldn't be able to replicate it without a similarly high price tag. So, 5k, no, a couple hundred... yea, if it's made well enough. I really ought to go get it fixed... I smashed the glass with one of my rings. :(
- kolbe 8y ago> I feel that the only reason to spend $5,000 on a watch is so that you can show off to other people that you can afford to piss away $5,000 on a watch This is everywhere and unfortunately a somewhat important social dynamic. I mean, what do you really think an MBA is? It's someone who can prove they can not work for two years and throw away $100k+ to party. And Goldman/McKinsey want to hire people who are part of the social class that can do that.
- throwawaymath 8y agoI own a $25,000 Lange & Söhne. While watches are a time-honored way of signaling, I didn't buy it to show off. I've actually never met anyone who recognized it, and off the top of my head I can't remember ever even getting a compliment on it. I'd never buy a Rolex, because they're too loud :) Here's the disconnect you're struggling with: you don't value watches. Or more accurately, you don't appreciate them beyond simple utilitarian timekeeping. That's fine, most people don't really care about them. Instead of trying to relate to people who buy expensive watches by valuing watches - which you clearly don't - relate to them through the broader experience of spending a lot of money on a hobby. Do you have any hobbies you spend "a lot" of money on, perhaps more than what's required just to engage with the hobby? Keep in mind that "a lot" is arbitrary. I have a friend who spends thousands of dollars on card games. I don't see the appeal, but it makes him happy and trading card games can be a fun activity. That hobby "doesn't require" a purchase of the most expensive, collectible versions of various cards, but people do it anyway. I'm pretty sure my friend doesn't do it to signal that he can spend that money :) The point is this: what's expensive for one person is affordable for another, and what's valuable for one person is frivolous for another. There's not much beyond that. It's all relative - in principle it all comes down to whether or not you spend strictly more than you need to on a thing so you can enjoy it beyond its raw functionality. If you do, then you're no longer treating that thing as a tool, you're treating it as a form of art. Like all forms of art, expensive watches are polarizing and subjective, and they attract a subculture of people who discriminate between things which seem utterly arbitrary to people who don't appreciate them.
- kleiba 8y agoYeah, see and that's the thing: I simply cannot even imagine having a hobby that would have me spend thousands of dollars. I would sooner switch hobbies. I mean, I don't mind if others have such hobbies -- to each their own. As a matter of fact, I have some friends, too, who are into collecting expensive watches. Yet, I still don't get it, just like in the grandparent comment.
- typomatic 8y ago> I simply cannot even imagine having a hobby that would have me spend thousands of dollars. I would sooner switch hobbies. Your imagination needs work. Being on HN, I'd assume that you have at least one hobby that necessitates a significant amount of electronics (gaming console + TV, monitor + PC, laptop). Any one of these (if you actually care about the hobby) will run you thousands of dollars. You'll probably dodge at this moment and say how necessary or important or utilitarian all those things are, but that's just because you like your hobbies and don't like other people's.
- __jal 8y ago> which is just silly. The majority of the point is signaling, yes. To determine whether or not it is silly, you need to consider the goals. A majority of the point of college for a lot of people is also signaling. Is that silly? Again, it depends. You may dislike comparing an expensive watch to an education, but there are people out there with a lot of money who care a lot more about your ability to look like their wealth-peer than they do about your education. I'd rather have the education, too, but there are lots of people in the world who don't work that way. (I have a couple nicer-than-cheap watches. One is due to features, the other is just gorgeous. Neither was anywhere near $5k.)
- charlesdm 8y agoNot that I care much about signalling, but you can't signal your education unless you bring you degree with you. You can signal your wealth. Wealth generally signals success, and if you're successful no one cares about your education. Formal education also doesn't mean intelligence. You can be super smart and have no degree, and be successful.
- hammock 8y agoWho says you can't signal education? What about Harvard t-shirts, club ties, class rings, etc. They're literally called "signet" rings.
- fhood 8y agoSome people buy a rolex because they want to display their wealth. Others buy a rolex because they love watches, and wish to own a pinnacle of the craft. I feel like you chose a bad example. Designer handbags for instance, seem to be more geared towards status symbols, although I am sure there are exceptions. A chris reeve sebenza is an example of an item that is desirable primarily because of it's craftsmanship and only secondarily due to its price. If you own one, the chance of someone else being aware of its value is practically zero.
- newnewpdro 8y agoIt's silly is that wearing $5k+ on your wrist is effective at influencing people. What's even more silly is your ignoring that fact. So-called status symbols are actually quite effective at getting people to pay attention to you, which is kind of important if you wish to compel them to do things.
- TheOtherHobbes 8y agoThat's why it's silly. It's not just the watches, or handbags, or cars - it's the political implication that this form of display increases your social influence, and your ability to acquire further wealth. If that's true - and it seems to be - that strongly suggests politics and economics are superficial and essentially trinket- and appearance-driven, and only very distantly related to genuine achievement or merit. IMO that's not just a problem, it's a disastrous failure of spirit, ethics, and imagination. It's fine if your institutions and values are operating at a pre-rational barely sentient level, but if you're trying to aim higher, it really isn't such a good thing.
- newnewpdro 8y agoIs it really surprising to learn you can manipulate how people perceive you by doing such silly things as wearing an expensive suit and/or watch, driving an expensive car, taking them to an expensive restaurant, etc? How is any of this new information? It's so well-known we've even got a silly name for the "power suit".
- tonyedgecombe 8y agoSometime it can work in reverse, I won't buy things from people who overtly display their wealth. If you turned up on my doorstep in an expensive car you are going to have a hard time selling me anything.
- newnewpdro 8y agoSometimes that filter is a feature, you probably wouldn't make a good minion.
- charlesdm 8y agoI love mechanical watches, but in addition to that, it's also the only acceptable piece of jewellery for a man to wear. However, the fact that something with so many small moving mechanical pieces can actually function still blows my mind to this day.
- ghaff 8y ago> it's also the only acceptable piece of jewellery for a man to wear Not quite. Though the only other one that can be a status symbol to any significant degree (among the assumed demographic) is a class ring--assuming you went to an "appropriate" school.
- dagw 8y agoCuff links are another example of acceptable jewelry for men, but they're hard to wear casually.
- phyzome 8y agoWatches (on the wrist or a chain), rings, cuff-links (as mentioned by another commenter), necklaces (sometimes), probably some brooch or lapel pins. Alternatively, to hell with "acceptable", wear the jewelry you want to wear.
- burfog 8y agoYou can also wear a plain wedding band.
- duality 8y agoSounds related to but subtly different from a https://en.wikipedia.org/wiki/Giffen_good https://en.wikipedia.org/wiki/Giffen_good.
- ghaff 8y agoOne important difference is that Giffen goods probably don't actually exist in the wild given that they depend on a somewhat contrived substitution effect.
- allenz 8y agoThe difference is that Veblen goods are luxury goods whereas Giffen goods are inferior goods (https://en.wikipedia.org/wiki/Inferior_good https://en.wikipedia.org/wiki/Inferior_good).
- jessriedel 8y agoWell, the mechanisms are generally different too. Giffen goods can exist even for simple models with homoeconomicus. Veblen good generally involve a signaling/status story.
- dredmorbius 8y agoBoth have a behaviour resulting from the purchaser's cost constraints.
- dredmorbius 8y agoSimilar in that supply-demand behaviours are pardoxical, though for different reason, at least topically. Considered as an informastion and signalling good, Veblen goods start more closely resemblin Giffen.
- arthurofbabylon 8y agoCan anyone recall this effect occurring with a software product?
- jayachdee 8y agohttps://en.wikipedia.org/wiki/I_Am_Rich https://en.wikipedia.org/wiki/I_Am_Rich
- reubenswartz 8y agoI've seen enterprise products with great features try to be way cheaper than the "market" price and get very little traction. Raise prices to around market level, and people are suddenly excited about the features and buying.
- asdignoionio 8y agoApple software (kind of). It's tied to specific hardware, so it's hard to say if people are paying for the software or the hardware. I have seen people turn down free software because they mistakenly believe an expensive program must be better. But that's not really the same, since that isn't a form of showing off.
- xevb3k 8y agoI really can’t see how that’s so. Your suggesting that if Apple products were more expensive they’d sell more? The only instance I can see where this might be true is with the Gold Apple watch (and that’s obviously not a purely software issue): http://uk.businessinsider.com/apple-watch-edition-sold-out-in-china-2015-4?op=1 http://uk.businessinsider.com/apple-watch-edition-sold-out-i... But in general I can’t really see this...
- bryanlarsen 8y agoI think it's relatively common advice that you don't price software between $500 and $10K. Below $500 you sell through mass-market channels and market to the end users (or their low-level managers) who buy it on their expense accounts. Above $10K you send out high-priced salesmen to sell to the C-level. It's much more difficult between those two levels, so you can increase sales by increasing prices above $10K. This old piece of common wisdom is probably mostly obsolete now that software is generally sold as a subscription...
- trhway 8y agoread some years ago in the context of high end speakers: "so, you are're just packaging $500 of speakers in nice boxes and selling it for $80K?" "you don't understand. The people are paying for the price."
- yesenadam 8y agoYeah, sounds crazy, but.. I've noticed when new cafes open, if they're kind of expensive they often quickly get packed with trendy people. If they were cheap, that glamour just wouldn't be there. A lot of that, and a lot of the remarks on this page, seem to have to do with a glamour of money, a faintly sexual worship of money. And the 'love' in that seems love of themselves, and not in a good way.
- taneq 8y agoThis is absolutely what happens. Once you go beyond a few $1000s of dollars, you're paying for the privilege of demonstrating that you can afford to pay that much for an entertainment center. My father-in-law's like this. Every time he visits he tells us all about his home theatre setup and how he's spent $15k on this component and $20k on that other component, and that it was a bargain because it usually costs $35k but he got a good discount because he's friends with the store owner. You bet he is, with the stuff he buys! But hey, it makes him happy.
- mattbierner 8y agoInteresting. I often find that my perceived 'luxuriousness' of a product decreases the perceived value of it. Like I'm sure Rolls makes nice autos and all that, but because they are created specifically to be high-end status symbols, they become cheapened in my mind and therefore cannot truly be high-end status symbols. A valuable good or experience is instead one that has an authentic story (which is hard to judge), or is super niche and shows an understanding and appreciation of the field, or is old and unique and difficult to obtain. I collect camera lenses for example and see people drop crazy money on old Leicas. And they are nice lenses but it's such a stereotypical choice that I can't help but negatively judge anyone who actually buys or aspires to them. Their brand's mystique has cheapened them for me. And let's not even get started on Hasselblad...
- cjlars 8y agoI don't have a theory fully worked out for this, but I'm half convinced that rents in HCOL coastal cities fit into this framework. Sure, it's nice living in San Francisco, but you can get the same or better weather in smaller coastal towns, get more space and live better on a cost of living adjusted basis in a whole lot of other places. But still people come to the big cities and struggle to make it financially. The good jobs and appreciating real estate, admittedly limit how well this theory fits together, but a big HCOL city is prestigious and exotic in large part because of, not despite, its price.
- dpark 8y agoA HCOL city brings a bunch of things together that you can't get all together elsewhere. Critically: 1. Jobs 2. People 3. Events/activities You can pay the San Francisco premium and have a massive job market, a million people to befriend/date/learn from/etc, and thousands of activities and experiences to engage in constantly. Or you can live in a small town with far fewer job opportunities, far fewer people, and far less to do. Small town life is not a bad choice if it's what you want. But if you want to live in a lively city, you're going to pay for it, because a lot of people want that life and you're competing with them for a space to do it. Now, if you're talking about Palo Alto, maybe.
- cjlars 8y agoThat explains the draw of SF vs Monterey, but not necessarily SF vs Houston. Why do the most prestigious cities reliably stay the most prestigious cities, if not for the prestige itself being the draw? As I said, I'm grasping a bit because I'm not sure I fully grok it. But there is something that would be lost about Manhattan if it became cheap. I believe it's not just the three items you list, but also the concentration of people that not only want to, but crucially, can afford the price of entrance. Beverly Hills comes to mind as an example, why do the rich and famous want to live there if not to also be surrounded by other rich and famous? Perhaps that's closer to the common link you mention in Palo Alto.
- dpark 8y ago
- akeck 8y agoMy theory about the meteoric rise in US undergraduate tuition since the early 1980s is that colleges and universities realized they could turn undergraduate degrees into Veblen goods.
- nemothekid 8y agoI don't think demand increases as the price goes up - only that colleges realized demand for an undergraduate degree was inelastic and that consumers could pay any price because they could get guaranteed loans from the government.
- dredmorbius 8y agoSlightly, for elite universities. More generally, education-as-credentialling, which is a form of signalling.
- dredmorbius 8y agoVeblen goods offer signalling opportunity, and must be both immediately cognisibly to the intended signalling audience (though not necessarially others) and high in cost in order to manifest credible signalling. They are not utility or consumption goods, but information goods. They exist where the underlying trait being signalled is difficult to communicate clearly or effectively, a circumstance especially true of social status signalling. Paradoxically, the hyperwealthy need not signal so loudly (they themselves are sufficiently well-known), but as one descends the ranks, say, below the top ten and above, say, the 90%ile (higher or lower as you prefer), that signalling becomes more necessary and costly. This is similar to a whole set of fad-driven behaviours, ranging from speech and etiquette to clothing, diet, music, politics, management, and programming fashions, where the underlying domain is complex. Eventually the faad itself becomes dominated by poseurs whose false affectation dilutes the signal. https://old.reddit.com/r/dredmorbius/comments/62uroa/clothing_music_diets_art_management_theory_fad_as/ https://old.reddit.com/r/dredmorbius/comments/62uroa/clothin... Related, diamonds & gemstones, and loss or clear signalling effect as inexpensive alternatives emerge. See earlier: https://news.ycombinator.com/item?id=17183929 https://news.ycombinator.com/item?id=17183929