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Why We Buy Luxury Goods in Times of Crises

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While the world suffers an economic slump, why are luxury items booming? The reason may have more to do with sociology than economics. In the midst of nation-wide employment crises, the ability to demonstrate wealth, via the purchase and display of luxury items, carries with it a more effective demonstration of one's purchasing power than in times of favorable economic conditions. "But, more than a symbol, buying luxury goods could indicate future success, owing to the selective advantage that showing off provides. In nature, competitors perform, and the most compelling, beautiful spectacle wins."

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Closely associated with the purchase of luxury goods is the production of counterfeit ones. Mimicry, too, has strong roots in human biology, where the behavior of the most dominant members of a community are quickly taken up by their peers. "Therefore, assessing whether luxury goods will maintain their impact, and thus their appeal, requires monitoring the extent of counterfeiting. Given that luxury goods provide individuals with a competitive advantage, higher luxury-goods sales could indicate a brighter economic future for a country. In a time of crisis, countries in which luxury goods play their selective role effectively are the safest bets for productive investment."

Photo credit: Shutterstock.com

Read it at Project Syndicate

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