why pay more?

When Radosław Sikorski, Poland's foreign minister, went to Ukraine for
talks last month, his Ukrainian counterparts reportedly laughed at him
because he was wearing a Japanese quartz watch that cost only $165. A
Ukrainian newspaper reported on the preferences of Ukrainian
ministers, several of whom have watches that cost more than $30,000.
Even a Communist member of Ukraine's parliament, the Rada, was shown
wearing a watch that retails for more than $6,000.

The laughter should have gone in the opposite direction. Wouldn't you
laugh (maybe in private, to avoid being impolite) at someone who pays
more than 200 times as much as you do, and ends up with an inferior
product?

That is what the Ukrainians have done. They could have bought an
accurate, lightweight, maintenance-free quartz watch that can run for
five years, keeping virtually perfect time, without ever being moved
or wound. Instead, they paid far more for clunkier watches that can
lose minutes every month, and that will stop if you forget to wind
them for a day or two (if they have an automatic mechanism, they will
stop if you don't move them). In addition, the quartz watches also
have integrated alarm, stopwatch, and timer functions that the other
watches either lack, or that serve only as a design-spoiling,
hard-to-read effort to keep up with the competition.

Why would any wise shopper accept such a bad bargain? Out of
nostalgia, perhaps? A full-page ad for Patek Philippe has Thierry
Stern, the president of the company, saying that he listens to the
chime of every watch with a minute repeater that his company makes, as
his father and grandfather did before him. That's all very nice, but
since the days of Stern's grandfather, we have made progress in
time-keeping. Why reject the improvements that human ingenuity has
provided to us? I have an old fountain pen that belonged to my
grandmother; it's a nice memento of her, but I wouldn't dream of using
it to write this column.

Thorstein Veblen knew the answer. In his classic The Theory of the
Leisure Class, published in 1899, he argued that once the basis of
social status became wealth itself – rather than, say, wisdom,
knowledge, moral integrity, or skill in battle – the rich needed to
find ways of spending money that had no other objective than the
display of wealth itself. He termed this "conspicuous consumption."
Veblen wrote as a social scientist, refraining from rendering moral
judgments, though he left readers in little doubt about his attitude
toward such expenditure in a time when many lived in poverty.

Wearing a ridiculously expensive watch to proclaim that one has
achieved an elevated social standing seems especially immoral for a
public official in a country where a significant portion of the
population still lives in real poverty. These officials are wearing on
their wrists the equivalent of four or five years of an average
Ukrainian's salary. That tells Ukrainian taxpayers either that they
are paying their public servants too much, or that their public
servants have other ways of getting money to buy watches that they
would not be able to afford otherwise.

The Chinese government knows what those "other ways" might be. As the
International Herald Tribune reports, one aspect of the Chinese
government's campaign against corruption is a clampdown on expensive
gifts. As a result, according to Jon Cox, an analyst at Kepler Capital
Markets, "it's no longer acceptable to have a big chunky watch on your
wrist." The Chinese market for expensive watches is in steep decline.
Ukrainians, take note.

Wearing a watch that costs 200 times more than one that does a better
job of keeping time says something else, even when it is worn by
people who are not governing a relatively poor country. Andrew
Carnegie, the richest man of Veblen's era, was blunt in his moral
judgments. "The man who dies rich," he is often quoted as saying,
"dies disgraced."

We can adapt that judgment to the man or woman who wears a $30,000
watch or buys similar luxury goods, like a $12,000 handbag.
Essentially, such a person is saying; "I am either extraordinarily
ignorant, or just plain selfish. If I were not ignorant, I would know
that children are dying from diarrhea or malaria, because they lack
safe drinking water, or mosquito nets, and obviously what I have spent
on this watch or handbag would have been enough to help several of
them survive; but I care so little about them that I would rather
spend my money on something that I wear for ostentation alone."

Of course, we all have our little indulgences. I am not arguing that
every luxury is wrong. But to mock someone for having a sensible watch
at a modest price puts pressure on others to join the quest for
ever-greater extravagance. That pressure should be turned in the
opposite direction, and we should celebrate those, like Sikorski, with
modest tastes and higher priorities than conspicuous consumption.

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