(2 of 2)
The classic work on the motivations of the rich is Thorstein Veblen's The Theory of the Leisure Class (1899). Veblen, who invented the term conspicuous consumption, argued that the rich don't accumulate wealth in order to consume goods. Just the opposite: they consume in order to display their accumulation. "The possession of wealth confers honour; it is an invidious distinction. Nothing equally cogent can be said for the consumption of goods, nor for any other conceivable incentive to acquisition, and especially not for any incentive to the accumulation of wealth." The rich also display their wealth, Veblen argued, by not working: "conspicuous leisure." In all societies, he wrote, "the upper classes are exempt from industrial employments, and this exemption is the economic expression of their superior rank."
But Veblen may need updating. How to explain people who accumulate more than they could ever possibly consume, and keep on working anyway? Many of the superrich (including Sam Walton, at $8.7 billion the richest man in America) pride themselves on living simply and expecting their heirs to do the same. They have no possible use for more money. Some have businesses to which they bring a missionary zeal, but can missionary zeal be brought to real estate syndications and leveraged buyouts -- the prototypical new fortunes of the 1980s? Although some may plead force of habit or lack of imagination, most would deny any explanation that mundane. Why do they keep it up?
Well, Veblen could not have anticipated the cult of commerce, which has made working more chic than idleness. The way you put your billions on display is to bustle like a billionaire businessman, not in a futile attempt to spend them. It is her job as queen of the Helmsley hotel empire, not the spending power of her accumulated wealth, that Leona Helmsley has skillfully converted into today's favorite currency of fame.
What's more, the wealth tabulations that are now a running feature of publications like FORTUNE and Forbes have made it possible to display accumulated wealth beyond the natural limits of conspicuous consumption. Veblen would feel vindicated to know that after some initial resistance, many rich people now happily supply the details of their fortunes to the staffs compiling these lists. Harry Helmsley ranks 65th in the world according to FORTUNE. And -- who knows? -- another $4 million here and there could make all the difference between 65th and 64th.
But surely, if competitive accumulation for its own sake is the point for the very rich, then we needn't worry too much that their productive energies might be sapped by higher tax rates. To take an extreme example, if every billionaire's fortune were cut by half overnight, their relative rankings would be exactly the same, and they'd still have more money than they could ever spend.
One Reagan tax cut that got little attention was a major 1981 reduction in the estate tax. Veblen would say this is the wrong approach to encouraging the greed of the superwealthy. Instead, when a very rich individual (say, $100 million plus) dies, the Government should audit the fortune and announce its relative ranking at a special press conference, as a service to "invidious distinction." Then it could, in good conscience, take a large chunk as a service charge.