Conspicuous Consumption Among Minorities

A really interesting new paper by Kerwin Kofi Charles, Erik Hurst, and Nikolai Roussanov. Here is the key conclusion :

Using nationally representative data on consumption, we show that Blacks and Hispanics devote larger shares of their expenditure bundles to visible goods (clothing, jewelry, and cars) than do comparable Whites. We demonstrate that these differences exist among virtually all sub-populations, that they are relatively constant over time, and that they are economically large.

The paper goes on to argue that these differences across groups can be explained by "a model of status seeking in which conspicuous consumption is used to reflect a household's economic position relative to a reference group," and to examine "the role of conspicuous consumption in explaining lower spending by racial minorities on items likes health and education, as well as their lower rates of wealth accumulation."

UPDATE (9/16/07): This post has turned out to be an interesting case study of the dangers of saying anything that apparently links race and culture. Andrew Sullivan linked to it, used the much catchier title "The Economics of Bling," and added what he thought was a funny video. Ann Althouse's reaction to Sullivan's post includes the phrase "old-fashioned racism." And Tom McGuire is baffled by the whole thing--adding that he obviously "picked a bad day to give up double espressos."

I'll just add that I saw Kerwin Charles present an earlier draft of the paper at the NBER Summer Institute a couple of months ago, and told him right after the presentation that I thought it was a terrific and very interesting piece. I linked to the paper immediately after I saw that Kerwin (and co-authors) had made some revisions and made the paper publicly available.

Comments

[corvid]

Is it possible that since important things--like health care and a decent education--are fabulously expensive and out of reach, people spend more on junk like fancy cars, jewelry and electronic gadgets? The reasoning: Might as well enjoy life on a small, insignificant scale since, no matter how much we scrimp and save, there's no way we could ever pay for private health insurance or tuition at a decent university.
.

[T]

Corvid,

That might be the case, but they were comparing similarly situated whites with blacks and Hispanics and they said that might explain racial differences in health spending, etc. So I would guess some people at the bottom and middle can find a way, and that is more likely to be whites. Though I certainly agree health and education costs are way to high.

I remember years ago a black spokesman, in encouraging blacks to save, made a comment along the lines that "wearing it on your ass does not mean it's an asset." Pretty funny.

[Gary]

Interesting. There are any number of possible explanations, the simplest of which is that as homo sapiens we're really not all that advanced, and the primitive urge to show off is still lurking pretty close to the surface. At its most basic level, this is probably about nothing more complicated than demonstrating one's status as a way of making members of the opposite sex want to go to bed with you.

[Matt]

Gary,
That's probably true, but how can that logic be applied to explain racial differences in spending?

[1315]

I would bet that poor Asian families manage to spend more on education and health, and less on conspicuous consumption than middle class blacks. Moreover, there would more likely be greater social repercussions in Asian families if a teen paid more attention to bling than to school. This is consistent with the usual finding that the poorest Asian kids usually outscore kids from the richest quintile black families on the Math SAT and other standardized tests.

Wealth matters, but culture matters more.

[Becky]

I only read the abstract, not the methodology, so I may be wrong, but did the authors collect actual financial data from sample households, or only estimates of expenditures? If the authors are relying on reported expenditures, it's possible that blacks and Hispanics don't spend more money on visible goods, but are more likely than whites to say that they do. (The same principle applies to tv ratings; people say they watch far more PBS than they actually do.)

[Brad]

Well,

Anecdotal evidence around where I live would support this. At first you are amazed at the fact that someone would spend so much on rims and “pimping” out there car, especially when so much of it to a white guy like me seems tacky and silly. I mean, gold rims on a Chevy Cavalier seems ridiculous and sad, especially when there are numerous things (such as getting a college degree) seem as if it would improve their lot.
But I think this can be explained through the fact that these groups affected by this trait are both due to the fact they are minority groups with built-in inferiority complex issues as well as just expressing luxury in the same manner white people do by purchasing gourmet coffee (i.e. – you splurge for perceived luxury in your group which you can afford, even if your money would be better spent).

The inferiority complex explained the differences between Asian minority cultural preferences and Hispanic/Black preferences. For the most part, except for a brief period during WWII, Asians have not been subject to the same degrading racial/cultural discrimination that the other groups have. In part, this is due to the success of Asia as well as the Western world’s fascination with Asian culture. African and Latin America on the other hand have never been afforded that same sense of respect (just look at the difference in foreign policy approaches with these two worlds). In addition, Blacks and Latin Americans have always been utilized economically for lower-level job skills that automatically stigmatized those groups in White America’s mind allowing for such an inferiority complex. Asians have historically seen the fruits of education, building in a value of education that essentially builds upon itself, something never allowed to work within the Black and Hispanic communities.
As for the luxury goods argument, as stated above, they do what provides them both (a) a personal self-perceived sense of having status and (b) what they perceive others will value. White people just do it on a more bohemian, understated level, since culturally ostentatious consumption is not looked highly upon except in the most tacky of Southern Baptist towns (think Tammy Faye Baker/Texas idea of understatement). I could argue that any person buying a Starbucks (when office coffee is free) is doing to same thing to undercut their development or child’s opportunities at an education as a Hispanic person putting black-lights on his car. I am sure there are Hispanic day laborers working somewhere near a Starbucks looking at all the “gringos” buying over-priced coffee and wondering why they are so stupid.

[joan]

The fact that black are more concerned about how they appear to the world is obvious, and hardly needs a statistical study to prove it. What is irritating about the paper is that they do not even mention the equally obvious reason, that it is a reaction to living in a society where they have to demonstrate to store clerks, cab drivers, police etc. that they are respectable. The authors of this paper seem unusually clueless even for an academic economist.

[Half Sigma]

"they do not even mention the equally obvious reason, that it is a reaction to living in a society where they have to demonstrate to store clerks, cab drivers, police etc. that they are respectable."

How ironic then that the stereotypical black consumption (big tacky jewelry, showy tire rims, etc.) has the opposite effect of making them appear respectable.

[mcg]

Perhaps one of the reasons that people think studies like this are racist is that people who read about it can't seem to resist speculating about why those differences exist---which frankly is a landmine of stereotype.

[cultcrit]

Anne Norton explained this years ago. The point is not a _difference_ in "racial" patterns of consumption, but rather that "bling" (which wasn't called that yet in Norton's piece-- Republic of Signs) demonstrates a cultural competence in and understanding of what non-Bling-buying populations can't accept about themselves: that Americans constitute themselves through consumption. The only "difference" here is that bourgeois, Anglo, etc. styles of consumption are in a position to present themselves as "normal" or "rational." Invisibility is the privilege. Not being granted this by current racial hierarchies, some people embrace visibility through bling and are immediately stigmatized as "irresponsible," etc. Nothing new here except the positivist truth claim (we've finally proved it!), for which the proper response is often, so?

[donviti]

cribs anyone?

[TiredOfIt]

Don't forget that most of these people live lives highly subsidized by the tax payers. People don't respect that which they don't earn - like their subsidized housing that they destroy. But those $2000 rims and $3000 stereo (on an $800 Cavalier) are there to impress! Idolizing the 'gansta' rapper thugs leads these people to try and emulate that type of flashy behaviour.

When you don't have to pay for rent, or food, or insurance, or education (all subsidized) then you can concentrate on the 'bling'.

[Dave]

I think we may be missing an important aspect here. A great many of these people depend on the government for health care and education so they see no need to save their money for these things. Just as welfare mothers tend to beget welfare mothers and absentee fathers their offspring take it for granted that they will be taken care of by the government. There have been many educational programs to try to break the cycle but it seems to not have much affect in most cases. It seems that only a few have the strength to break the cultural and social bonds learned so early in the home and reinforced by so many around them. Remember that misery loves company.

I know a young black woman From such a family working her way through college right now. At 16 she was a senior in high school and also taking college courses at the local community college while also working at Bojangles. Her family called her "cracker" and said she wanted to be white. Encouragement? They did all they could to stand in her way. The sad part is that many more kids deal with this problem than we have any way of knowing.

[dcase]

Clearly, many of the commentators here are not familiar with basic empirical research methodology i.e, regression

The interesting aspect of the study is that controlling for observable characteristics (income, age, etc.) that there is a gap in consumption choices. Hence, the explanation proffered that government subsidization of housing, health care,etc. providing this incentive is bunk because that stuff is controlled (proxied) for in the statistical model.

In addition, much of the difference in consumption was driven by increased spending on clothes and such. So it is observationally equivalent in the response variable if more blacks bought Armani than observationally similar whites as opposed to buying Blacks buying throwback jerseys vs, similar whites buying suits from Men's Warehouse.

[i n o]

why is it that--despite all our talk of diversity, multi-culturalism, etc.-- individual cultures, who explicitly identify themselves as such, cease to exist in the blink of an eye as soon as rational criticism is leveled against it? suddenly we are prohibited from speaking of the "black community", e.g.

preferencing bling over education is a reality, and an un-civic one at that. to the person who asked, "so?", I submit that any nation who cares for its future will work to eliminate what is contrary to its own self-interests.