Bling = poverty

Very interesting blog post in the Economist today, about how minorities in America spend way too much on conspicuous consumption:

Erik Hurst, Kerwin Charles, and Nick Roussanov found many people view their consumption as a signal to others. Further, black and Hispanic Americans are more likely, after controlling for permanent income, to spend a greater share of their wealth on conspicuous forms of consumption such as automobiles, clothes, and jewellery. To fund this spending, they often forgo more beneficial goods such as health care, education, and future consumption, i.e. saving. They found the conspicuous consumption motive can explain as much as 50% of the Black/white wealth gap, after controlling for income.

The writers of the study go on to speculate about a lot of theories about why this might be happening, but in the end, economists don't really understand consumption patterns (the author of the post says that "Economic theory predicts we consume for our own benefit rather than to impress others," but that's total BS; impressing others is a way of benefitting yourself, duh).

But this is a very encouraging study. If consumption choices are responsible for a large piece of racial inequality, that means poor minorities can narrow the gap somewhat without waiting for big changes in the system that may or may not ever come.