Susan at Counterfeit Chic takes a look at what the rich do, historically, to preserve the status of their luxuries:
In the course of a series of posts on Wolfgang Pesendorfer's research into fashion cycles, public intellectual and trendspotter (great hi-lo combo!) Phil at Millionaire Socialite has raised the issue of social signaling and its relationship to changing fashions. Briefly, one of Phil's arguments is that once high status individuals have acquired an expensive luxury item as a signaling device, the item's manufacturer has an incentive to lower the item's price somewhat in order to sell more units to lower status individuals who wish to emulate (and perhaps interact with) the original adopters. As more consumers purchase the item, however, it loses its cache. The item's loss of signaling value may be further exacerbated by third-party production of knockoffs, which make a version of the item accessible and affordable to still more aspirational consumers. Thus the high status folk move on to new expensive or rare objects of desire to differentiate themselves, and a fashion cycle is born.
Not all influential, high status types or luxury goods manufacturers are content simply to move on, however. Instead, they create or invoke laws that seek to slow down the fashion cycle by either (1) limiting access to the luxury item to a particular class of people, or (2) preventing copying of the item.
The first legal strategy, creation of "sumptuary laws," is traceable back to at least the Roman Empire and exists across many cultures. These laws governing consumption of all types (clothing, food, alcohol, etc.) might, for example, limit the wearing of ermine fur to royalty. And if commoners caught on and began dyeing rabbit fur to look like ermine, that could be banned as well. As Canadian professor Alan Hunt describes in his fascinating but sadly out-of-print book, Governance of the Consuming Passions, the prevalence of such laws in European society declined dramatically by the 17th/18th centuries -- at least in their most obvious, class-based forms.
This is interesting. What I'm wondering is whether the preservation of exclusivity is the basis for luxury taxes as well. While many may think of a luxury tax as a way to effectively target the rich, in collecting revenue, they also have the effect of making luxury items even more unattainable to the masses. I'd be curious to know, and not at all surprised, if the original idea of a luxury tax was hatched by the wealthy, especially since "sumptuary laws" probably wouldn't be legal these days.
More: Someone should do a study of the effect of the luxury tax in Major League Baseball which penalizes teams for going over a certain salary cap. That penalty money is then distributed to the other teams in the league. This would seem to be an egalitarian practice, but I woner if this has the effect of preventing middle-wealth teams from affording the big talent, knowing that with high salaries come bix luxury taxes. Just a thought.
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