Wednesday, December 7, 2011

Expenditure Cascade

I came across the term "expenditure cascade" in this Slate article.

The author defines the expenditure cascade process as starting with the fact that those at the top are spending a lot more money.

The process begins with the completely unremarkable fact that top earners have been spending at a substantially higher rate than before. They’ve been building bigger mansions, staging more elaborate weddings and coming-of-age parties for their kids, buying more and better of everything.

Such spending then changes the norm in a particular circle, neighborhood, or community "since all spending is local" and those on the edge of that circle spend more and "shift the frame of reference" for the next group down and so on. So, you are not just keeping up with the Joneses, but keeping up with your peers, friends and other circles you may move in and out of.

I feel like I normally do a good job at ignoring the Joneses, but I recently altered my normal behavior based on  context.  I was at a charity, holiday luncheon on Palm Beach with a very large group of women who are affectionately known as "ladies who lunch."  These women range in age, but the majority are super rich or very rich, they do not work and rather their "job" is to attend social lunches, support wonderful causes and be seen in the society pages.   Before the luncheon there was shopping opportunities, think high end jewelry, fancy purses, etc.  Normally, I would never shop at this type of event because Palm Beach is not known for bargains.  But, being with this group, normal shifted for me and I bought two items (paying too much for both, but 20% went to charity).   Looking back, I was taking my cues from both the environment and the group that I was with. 

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