One of the most frustrating aspects of today’s society is that so many Americans show contempt for the wealthy and support policies rooted in sticking it to successful people they clearly envy. The anti-rich rhetoric and policies have great political appeal, but no basis in reality. The fact is, we need the rich, which is why I love this piece by Bruce Bartlett. Here’s a taste. I encourage you to read the entire column.
Economists have long recognized that “conspicuous consumption” by the wealthy served the beneficial social and economic purpose of creating initial markets for products that later became necessities of life used by everyone. As the economist Ludwig von Mises put it in his 1927 book, Liberalism:
The luxury of today is the necessity of tomorrow. Every advance first comes into being as the luxury of a few rich people, only to become, after a time, the indispensable necessity taken for granted by everyone. Luxury consumption provides industry with the stimulus to discover and introduce new things. It is one of the dynamic factors in our economy. To it we owe the progressive innovations by which the standard of living of all strata of the population has been gradually raised.
This fact is illustrated in a 2006 Pew study, which looked at a range of products and the extent to which they had gone from being luxuries to necessities. For example, air conditioning was considered to be a luxury by 72 percent of people in 1973, with only 26 percent saying it was a necessity. By 2006, those numbers were reversed, with 70 percent of people saying that air conditioning was a necessity and only 29 percent viewing it as a luxury. Between 1996 and 2006, microwave ovens went from being considered a luxury by 68 percent of people to being considered a necessity by 68 percent of people.