nxiety abounded. Per capita consumption was rising. But consumers’ expectations were rising even faster.In The Wealth of Nations Adam Smith observed that even a “creditable day-laborer would be ashamed to appear in public without a linen shirt” and that leather shoes had become a “necessary of life” in 18th century England. The most influential work on the subject, however, has been Thorstein Veblen’s “Theory of the Leisure Class.” Veblen argued that in affluent societies, spending becomes the vehicle through which people establish social position. The conspicuous display of wealth and leisure are the markers that reveal a man’s income to the outside world. The rich spent clearly as a kind of personal advertisement, to secure a place in the social hierarchy. Everyone below stood watching, and to the extent possible, emulating those one-step higher. Consumption was a trickle down process.Data generated by the Census Bureau, the Bureau of Labor Statistics, the Federal Reserve and other nonpartisan sources oppose claims commonly made. For example, data from such agencies show that differences in family income largely reflect differences in how many members of a family actually work and how hard they work. Americans in all income groups have prospered, or have failed to prosper, together. Gains by upper-income Americans have not come at the expense of middle or lower-income Americans. Nor has anyone else gained in those periods when higher-income families have lost ground. The best era in recent history for middle-income and lower-income American families was the Reagan era, which lasted from 1982 to 1989. During that period, middle-class families saw their real incomes grow by an average of 12.6 percent, while lower income families saw an average increase in real earnings of 12.9 percent. The wealth inequality debate should focus on what public policies will aid the accumulation of ...
