Conspicuous Consumption

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I happened upon an article at “The Moderate Voice” about “Conspicuous Consumption” originally posted on UPenn’s Wharton Business School’s website. It’s a great piece of research which explains nicely in part why Blacks and Hispanics tend to have less savings and spend less on education.

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Blacks and whites appear to have different spending habits only because blacks tend to be concentrated in poor communities more than whites, Roussanov says. Nationally, the poor white is likely to be surrounded by many whites who are not as poor, so he or she cannot afford to use conspicuous consumption to compete for status. But a black person of the same income is more likely to be surrounded by others of similar income, making this competition feasible.
Knowledge@Wharton

In the end, it’s all about signaling social status. The signals you send are different depending upon the intended audience. And this explains much of the difference in spending patterns in Black and Hispanic communities versus other communities. Great stuff.

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