Is home buying conspicuous consumption?
Recently I ran across this penetrating explanation for the wave of foreclosures now sweeping certain parts of the country:
Buying a first house is cool. Trading up to a pricier house is cool too. Borrowing is cool. The ultimate cool is a low interest rate...But owning? That's not so cool...Home buyers are now "consumers", and buying a home is just another leisure activity in a society that has elevated shopping into a civic duty.
This pungent observation comes from a Southern California real estate reporter whose name I'll withhold to protect the clueless, because I'm fairly sure that some day this reporter will regret these words. Maybe she does already. Because I can't be the only one willing and anxious to point out that, as a compelling reason why desperate homeowners default on loans, "buying is cool, owning isn't" is as vapid, amateurish and juvenile as anything I've seen.
It's also the sort of sophomoric psychologizing and hair-trigger moralizing you'll find on the bubble blogs, which suggests that at least one real estate reporter hits the blogs for edification and inspiration. If true, this could be the first verified discovery of a real estate reporting infinite loop, with the blind leading the blind leading the blind leading the...
Just a guess, but I'll bet that unsophisticated choices, self-serving loan agents, family and financial crises, and flattening or falling home prices have a lot more to do with rising defaults than borrower ennui. But then, I don't happen to think that the act of home buying gives us an insight into the moral fiber of our nation, or that the real estate marketplace is a Manichean battleground between darkness and light. But then, I know that home buying is more about the homely nesting instinct, an instinct almost comically incomprehensible to those who don't have it and don't know they don't.
But that's just my opinion. For a bona fide expert's view of conspicuous consumption, let's turn to the man who coined the phrase, Thorstein Veblen, in his seminal The Theory of the Leisure Class. Would Thorstein Veblen call home buying conspicuous consumption?
Beats the heck out of me. But I'll take a whack.
The Theory of the Leisure Class, first published in 1899 and relevant today, may have made Veblen the most cited and least read social commentator of the twentieth century. I say "may have" only in deference to Marshall "The Medium is the Message" McLuhan, who may be just as frequently cited and infrequently read, and for the same reason: to most readers, Veblen and McLuhan are densely incomprehensible.
Why? Because Leisure Class and Medium are written in the turgid style academics use on other academics. In fact, I wonder if anyone really knows what Veblen or McLuhan said. McLuhan spread the intellectual jargon a foot thick. As for Veblen, the social critic H.L. Mencken was convinced that Veblen hid his lack of ideas behind verbiage too dense to hack through and too uninviting to try. It's an easy conclusion, but if Mencken had read Veblen the way the intrepid jungle explorer travels across quicksand—quickly and lightly—he would have found that Veblen shared his skeptical attitude toward the "boobosie". And if Mencken, who promoted many a career and popularized Nietzsche in America, had been for Veblen, instead of agin him, Veblen might not have died in obscurity.
I picked up Leisure Class years ago and dropped it with a dull thunk two or three pages later. Prose like the following isn't just deadly enough to shoot a brilliant thinker in the foot. It could drop an elephant at fifty yards:
It may be in place to recall the modern psychological position. Beauty of form seems to be a question of facility of apperception. The proposition could perhaps safely be made broader than this. If abstraction is made from association, suggestion, and "expression", classed as elements of beauty, then beauty in any perceived object means that the mind readily unfolds its apperception activity in the directions which the object in question affords. But the directions in which activity readily unfolds or expresses itself are the directions to which long and close habituation has made the mind prone. So far as concerns the essential elements of beauty, this habituation is an habituation so close and long as to have induced not only a proclivity to the apperceptive form in question, but an adaptation of physiological structure and function as well.
Yes indeed. But then an economist I read recently, Douglas Dowd, quoted Veblen extensively and somehow had him making sense. Dowd claimed that Veblen wrote in nineteenth-century code, hiding his subversion behind an ornate, billowing style designed to disarm Gentle Reader. Alrightee then. Leisure Class was checked out again and, with Dowd's words whipping me on, I hacked, forded and rappelled my way to page 151 of the 400-page Penguin Twentieth Century Classic edition. No, I didn't make it to Eldorado, but I did pretty darn good. One of my neighbors, an economist, tells me he's never made it that far.
Besides Dowd, what kept me surging forward was the promise that, as the Penguin edition's jacket says, "...Veblen discusses the hollowness of our canons of taste and culture and considers the emptiness of those habits of life and thought that many of us like to regard as our strengths." Whether his style was flowery nineteenth-century subversion or just shaggy late-Victorian prose in need of a haircut, Veblen could offer no-holds-barred zingers like this observation on clergymen:
They are unprofitable servants, and there is a honorific implication for their master in their remaining unprofitable. It is needless to point out the close analogy at this point between the priestly office and the office of the footman. It is pleasing to our sense of what is fitting in these matters, in either case, to recognize in the obvious perfunctoriness of the service that it is a pro forma execution only. There should be no show of agility or of dexterous manipulation in the execution of the priestly office..."
Remember, this is 1899.
Or this speculation on why dogs are popular pets:
He is the filthiest of the domestic animals in his person and the nastiest in his habits. For this he makes up in a servile, fawning attitude towards his master, and a readiness to inflict damage and discomfort on all else. The dog, then, commends himself to our favor by affording play to our propensity for mastery, and as he is also an item of expense, and commonly serves no industrial purpose, he holds a well-assured place in men's regard as a thing of good repute.
Veblen is silent, at least in the first 151 pages of Leisure Class, as to whether home buying is conspicuous consumption. But I'll be happy to speculate on what he might have thought and said.
I think the popular definition of conspicuous consumption—"I own this, not because I need to, but because I can afford to"—isn't too far from Veblen's own. To this I'd add a few nuances: "I own this because its ownership is a blatantly wasteful use of my resources, and this blatant wastefulness shows you my resources are greater than yours. And because I have more resources to squander, my social position is higher than yours." I'll complete this enhanced definition of conspicuous consumption with one of its key components, Veblen's theory of pecuniary emulation: "Imitate me if you can, or even if you can't."
I've shifted the focus here from "need" to "wastefulness" because a) it's Veblen emphasis, as I understand it, and b) it injects more objectivity into the debate. One man's "need" is another man's "frivolous luxury". Of course, one man's "need" is also another man's "wastefulness", but the concept of blatant waste may bring Veblen's theory into sharper focus.
So let's return to our real estate reporter/aspiring social commentator and see how her critical and, to some, comforting perception of the immorality of homebuying matches Veblen's definition of conspicuous consumption.
Buying a first house is cool. Here distinguishing between "need" and "wasteful" is useful. Does the typical first-time home buyer "need" to own her own home? The critic will say no, that renting also puts a roof over her head. The first-time home buyer will say yes, that she is simply responding to an instinctual need to put down roots, to "become established", to "get ahead".
So the debate ends in a tie when framed by "need". But now let's shift the focus slightly and ask whether buying that first house is "wasteful"? And let's answer that question with another: who is more likely to leave a home after five years with something to show? The renter, who may have to arm-wrestle his landlord to get his security deposit back, or the home owner, whose five-year stay most likely has gotten her through the ups and downs of one market cycle and into the typically higher prices of the next?
Then increase the number of years of renting versus homeownership to ten, twenty or thirty, and the owner's chances of walking away with more than the renter increase dramatically. Decrease the number of years to, say, one or two, and the chances of the owner coming out ahead decrease dramatically. Yes, in the very short term renting can make as much or more financial sense as owning. If your employer tells you you're moving back to Boston in a year, and you don't have a deep aversion to landlords, renting carries less risk.
And yes, this is the old "don't throw your money away on rent" argument with a twist. But let's distinguish between the person whose residence will be short (and please, spare me the "hey life is short" pseudo-profundity that excuses all kinds of instant gratification) and the person whose investment outlook is short-term. Someone with a live-for-today investment outlook will point out that she can rent a house for less than she'd pay in mortgage payments for the same house "and that's a good deal". In fact, one of the more alluring tenets of bubble-think expresses this idea slightly differently by stressing that you can rent "a much nicer home" than you can buy. I've even seen this sentiment hitched to the American Dream, which in this case has been updated to read "Live like you belong in the next higher tax bracket".
But it seems to me that trading rootedness and home equity for a bigger, fancier rental is an excellent definition of wastefulness and materialism.
In other words, it walks, talks and acts like conspicuous consumption.
Now let's call in another noted specialist, another seminal twentieth-century thinker, first published about the time of Veblen: Freud.
Buying a first house is cool. Freud's theory of projection, as I understand it, is that people sometimes project their thoughts and feelings onto others. [Turns out I blew this, but it's a nice thought, even if Freud didn't have it, so work with me.] Unable to see that there are other ways to think and feel besides their own, they assume that everyone thinks and feels the way they do. If they don't have the nesting instinct that drives the home-buyer, for example, they don't understand the home buyer's motivation to nest. In extreme cases (see bubbleheads and a certain Southern California real estate reporter) they may even deny that her motivation exists.
And if her nesting motivation doesn't exist, then why would she, or you, John Q. Bubblehead, or anyone else take the imprudent and costly step of buying a home? Just to show us they can do it, right? Just to rub it in, right? Just to be cool, RIGHT? It's "Look at me. I can afford a home. I'm a big shot. Eat your heart out." And hey, that's conspicuous consumption, right?
We'll let Freud get back to interpreting the dreams of hysterical Victorians, and take this home on our own.
Trading up to a pricier house is cool too. Yes, sometimes this is conspicuous consumption. But it can also be an expanding family that's outgrown their starter home, or wants a safer neighborhood or a better school district or all the above. To me this looks less like conspicuous consumption and more like a quality of life decision. Maybe we should even be grateful for this drive: maybe it's the reason we're not still living in caves.
And guess what? Renters also trade up to pricier homes, both in actuality, as when they move from, say, an apartment to a single-family home, and by implication. By implication? Remember, one of the widely-touted benefits of renting is that you get more house for the same money. Let's develop this thought. "More house for the same money" implies "more house on the same income", which implies Veblen's pecuniary emulation: living the lifestyle of the next-higher tax bracket. But of course, quality of life, not pecuniary emulation, is the reason many renters trade up to bigger, pricier houses. Just like many home buyers.
So when do you cross the line from quality-of-life to conspicuous consumption? Apparently, according to some critics of homebuying, when you cross the line from renter to homeowner. Which puts us back where we started: "Renting good. Buying bad". I think they call this "circular reasoning".
Borrowing is cool. Kind of a stretch. As "cool", borrowing is right up there with the ecstatic mysteries of double-entry bookkeeping. No home buyer has ever indicated to me that she thought mortgage debt is "cool".
The ultimate cool is a low interest rate. I'll grant you this: when it comes to interest rates, "low" is a whole lot "cooler" than "high".
But owning? That's not so cool. Here's some advice for the social critic and moral-compass-of-their-times wannabes. Yes, some adults do divide life into "cool" and "not cool". But the next time you're standing in line at the grocery store, grinding your teeth as you have to listen to some home buyer prattle on about the joys of homeownership, take a deep breath, count to ten, and then consider the idea that she's gone through a rite of initiation that almost certainly called for years of focus and sacrifice.
In fact, focus and sacrifice probably characterize her life. And people like her usually don't divide life into "cool" and "not cool".