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$12 coffee and the positional economy

16091786152_cb28be709e_mStarbucks is opening some exclusive “Reserve Roasteries and Tasting Rooms,” which will offer high-end coffee experiences at around $12 per cup. George Will discusses the phenomena, drawing on an economist who distinguishes between the “material” and the “positional” economy.

First we have to meet our basic “material” needs (food, shelter, clothing). After that, what once were luxuries (automobiles, air conditioning, computers) are turned into necessities. After that, we spend money on high-status goods that enhance our social “position.”

Read this analysis and my questions about it after the jump.

Would you buy a $12 cup of coffee? If you like coffee enough, I suspect you would, if only once, even if no one saw you do it.

From George Will, Starbucks shines in our ecosystem of snobbery – The Washington Post:

Four decades ago, the economist Fred Hirsch distinguished between the material economy and the positional economy. Once a society has satisfied basic material needs (food, shelter, clothing), it turns yesterday’s luxuries (cars, air conditioning, college educations) into necessities. Because these are mass-market commodities, such material prosperity is a leveling, egalitarian force. Positional competition is emphatically not. . . .

After elementary needs — food, shelter, clothing — are satisfied, consumption nevertheless continues, indeed it intensifies, because desires are potentially infinite. People compare themselves with their neighbors, envy their neighbors’ advantages and strive to vault ahead in the envy-ostentation sweepstakes.

The political equality of democratic societies leaves ample room for, and incites, social inequalities, which are coveted because they counter the leveling forces of mass affluence. Furthermore, as inherited privilege has been replaced by social rationality — Napoleon’s “careers open to talent,” a meritocracy based on skills and education — there is a residual human urge for irrational distinction. Such as savoring a $12 cup not just for the — let us stipulate — divine flavor but for the sheer fun of showing that you can and that your palate is so refined that merely very good coffee would be excruciating. . . .

Where will the positional economy end? It won’t. Stanford University professor Francis Fukuyama notes that it is a peculiarity of human beings that they desire some things “not for themselves but because they are desired by other human beings.” Hamsters have more sense. This characteristic of our species — the quest for recognition by distinguishing oneself from others — provides limitless marketing possibilities because for many wealthy people, “the chief enjoyment of riches consists in the parade of riches.” So wrote Adam Smith in “The Wealth of Nations,” published in the resonant year of 1776.

[Keep reading. . .]

In the full column, Will uses the example of the “top 5” lists, as in “the top 5 craft breweries” and “the top five artisanal cheese shops.”

I admit to using TripAdvisor and other online lists when I am in a strange city and looking for a place to eat. I generally look up things like “Top five BBQ joints.”

But I do that not to be “positional” but, if we are looking at economic reasons, out of cheapness, trying to find the best quality for my money. That’s just basic economic information necessary to Adam Smith’s free market.

I don’t go to the top BBQ joint to impress anybody. Usually, since I do this when travelling, I don’t know anybody there and nobody knows me. I am getting no social points at all.

I might try a $12 cup of coffee–once–simply because I like coffee and would be curious how it could possibly be good enough to command such prices. Then again, I might realize that my palate is probably not sophisticated enough to tell the difference and that I would be wasting my money. Plus, if anyone I knew saw me there, I would probably be embarrassed. So I probably wouldn’t try it after all. But some would. I suspect their immediate reason, though, would be aesthetic or hedonistic rather than for their social advancement.

What do you think about this? I do think there is something to it, though I’m not sure what.

Photo by Adam Barham, Starbucks Reserve Roastery and Tasting Room, Creative Commons License.

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