Positional goods and services are inherently minority enjoyments. These are enjoyments -- "elite" education, "exclusive" vacations or properties -- available only to persons with sufficient wealth to pursue the satisfaction of "positional competition." Time was, certain clothes, luggage, wristwatches, handbags, automobiles, etc. sufficed. But with so much money sloshing around the world, too many people can purchase them. Too many, in the sense that the value of acquiring a "positional good" is linked to the fact that all but a few people cannot acquire it.
That used to be guaranteed because supplies of many positional goods were inelastic -- they were made by a small class of European craftsmen. But when they are mass-produced in developing nations, they cannot long remain such goods. When 40 percent of all Japanese -- and, Fortune reports, 94.3 percent of Japanese women in their 20s -- own a Louis Vuitton item, its positional value vanishes.
James Twitchell, University of Florida professor of English and advertising, writing in the Wilson Quarterly, says this "lux populi" is "the Twinkiefication of deluxe." Now that Ralph Lauren is selling house paint, can Polo radial tires be far behind? When a yacht manufacturer advertises a $20 million craft -- in a newspaper, for Pete's sake; the Financial Times, but still -- cachet is a casualty.
As Adam Smith wrote in "The Wealth of Nations," for most rich people "the chief enjoyment of riches consists in the parade of riches, which in their eye is never so complete as when they appear to possess those decisive marks of opulence which nobody can possess but themselves."
Hennessy understands the logic of trophy assets: It is selling a limited batch of 100 bottles of cognac for $200,000 a bottle.
There is some good news lurking amid the vulgarity. Americans' saving habits are better than they seem because the very rich, consuming more than their current earnings, have a negative savings rate.
Furthermore, because the merely affluent are diminishing the ability of the very rich to derive pleasure from positional goods, philanthropy might become the final form of positional competition. Perhaps that is why so many colleges and universities (more than 20, according to Twitchell) are currently conducting multi billion-dollar pledge campaigns. When rising consumption of luxuries produces declining enjoyment of vast wealth, giving it away might be the best revenge.