Will anything be a luxury in a richer world?

From candlelight to chicken, growth has made the rare commonplace. Yet conspicuous consumption keeps inventing new ways to stand out.

Matt Ridley is a science writer and a former member of the House of Lords.

In the trailer I just watched for the new film of Sense and Sensibility, there is a brief glimpse of a ballroom lit by at least 50 candles in shot, probably more out of shot. This implies that the Dashwood family was a lot wealthier than Jane Austen’s plot says. Tallow candles were almost absurdly expensive in those days – way beyond the reach of the poor; an extravagance even for those of middle income.

According to calculations done in 2006 by Roger Fouquet and Peter Pearson (“Seven Centuries of Energy Services: The Price and Use of Light in the United Kingdom (1300-2000)”), the price of all artificial light was once exorbitant. Today roughly a fifth of a second of work on the average wage will buy you an hour of light from a normal LED bulb in a bedside lamp. In 1800, on the then average wage, you would have to work six hours to get the same quantity of light from a bunch of tallow candles – let alone a whole ballroom’s worth of light. The deflation in the price of light has been epic.

In short, light was once a luxury and is now a quotidian necessity. If, in future, the world becomes a more prosperous place for everybody, that will happen to many more things. Will nothing then be a luxury good? Think of the things that were out of reach for all but the wealthiest when I was a child but are now commonplace necessities: air travel, private cars, avocados. Or the things that were once the unimaginable preserve of only the richest people in past centuries: music on demand, cotton underwear, ice cream, chicken.

But prosperity also creates markets for new luxury goods. In 1989 a Hong Kong film called God of Gamblersintroduced Chinese audiences to a phrase that would later become a cult among the newly wealthy: “Lafite 1982”. To show how carelessly wealthy he was, one of the film’s characters orders a bottle of Lafite Rothschild 1982, the vineyard and vintage that the great wine expert Robert Parker would go on to judge so perfect, in 2000, that it deserved 100 Parker points.

Driven largely by Chinese demand, the price of a bottle of Lafite ‘82 rocketed into the thousands of dollars and remains there to this day. Fake bottles of it proliferated, much as fake Gucci handbags and Rolex watches had. Wine has that perfect quality for a luxury good of being infinitely improvable, which is why it is so often a conversation item among the very rich. You can always humiliate a chum who orders Lafite 1982 by demanding Romanée-Conti 1999 instead.

Both are delicious, I’m sure, but I doubt I could necessarily tell the difference from, say, Léoville Barton 2014 (£100) or even Berry Bros. and Rudd’s Good Ordinary Claret (£20). In wine, smaller and smaller increments of deliciousness garner larger and larger price premiums.

Photo by Kym Ellis on Unsplash

Economics says that demand is inversely proportional to price: the more something costs, the fewer people will buy it. But there is a special category of things that become more and more wanted the dearer they are. These are known as Veblen goods after the Norwegian-American economist Thorstein Veblen and his theory of conspicuous consumption. He suggested that the wealthy like to display their wealth by bidding up the value of useless items. Just as Kwakiutl Native Americans ostentatiously burned potlatch goods to demonstrate their wealth, so the purpose of a Rockefeller’s spending was the spending itself, not the things spent on.

Napoleon III liked to show off his wealth by laying aluminium cutlery at his table and decorating his empress with aluminium jewels. The metal was new, rare and fascinating and for a while people pretended to find it beautiful. Today aluminium is seen as cheap, common and functional. Mass producing a luxury good can destroy its fascination in a flash. But innovation will always find new luxuries to celebrate.

Now – and stay with me here – I want to draw a parallel between Veblen goods and the plumage or song of birds. There is a long-standing debate in evolutionary biology about the purpose of extravagant feathers like the tail of a peacock, the bright colours of a bird of paradise or the exquisite song of a nightingale. Once naturalists got over their Victorian misogyny, they grudgingly came to admit that Charles Darwin was right and that these bright plumes and elaborate songs had been bred into male birds by successive generations of choosy females. Seduction by the hottest rather than survival of the fittest. But why?

Being utilitarian creatures themselves, most biologists decided, in thrall to Darwin’s rival, Alfred Russel Wallace, that this extravagance of birds’ plumage must have a practical purpose: to show who was the fittest male, to sort the eugenic wheat from the dysgenic chaff. But that does not account for the random and bonkers quality of male display, where there is no rhyme or reason as to which feathers or which colours are exaggerated in various species.

Instead, as Darwin argued, female birds seem to like “beauty for beauty’s sake”. The underlying reason, spotted by the geneticist Ronald Fisher, is probably that the reward for choosing the most colourful male is not healthy offspring but sexy offspring, themselves capable of attracting females in the next generation. It is a self-reinforcing process and there need be no logic to it.

Spending on luxuries has a similar quality: it demonstrates your value as a mate. Human beings are endowed with an instinct to show off to attract high-quality mates. And sexual selection, like conspicuous consumption, can produce eccentric, frivolous, inventive and novel results that natural selection would not countenance. There is room for irrationality in both biology and economics.