Most fiscal system discourage luxury consumption with a tax rate higher than that used for “normal” consumption, whatever that means. Any public finance 101 course will tell you that there are two reasons for this. One is that the demand for these goods is less responsive to variations in price than the demand for “normal” goods. Therefore, increasing their consumption tax rate does indeed lead to a slump in demand and GDP, but it is a lesser one than you would have had taxing nonluxury consumptions for any given revenue. The other reason is that it’s normally the wealthy consuming luxury goods, and economists are trained to have a preference for economic equality. All other things being equal, it’s best to tax the rich.
All of this holds in a static model and in equilibrium. In equilibrium, because it focuses on the ideal condition (which never quite happens in real life) in which each and every household has maximised their utility, and each and every firm its profit. Static, because it does not deal with the time dimension. Specifically, it assumes out technical innovation.
Critiques to the notion of economic equilibrium aside, I would argue that, if you do take into conderation the time dimension and technical change, there is a third reason to discourage luxury consumption. This: luxury goods don’t change the world. They never did. They don’t create new market ecosystems; they don’t promote social mobility and diffused wealth. What does change the world is cheap goods. Not Bugatti or Rolls Royce, but Ford Model T and Fiat 600; not private yachts, but low cost airlines; not the satellite phones of yuppies in the 80s but 20$ GSM phones accessible to shepherds and farmers in Africa; not the wonderfully ornate manuscripts of the 15th century’s, but Aldus Manutius’s portable books and the printing press; not the IBM mainframe but the Apple Macintosh. Luxury objects are often beautiful, but they almost always embody a future identical to the past, with (simplifying quite a bit) wealthy families expanding their collection of gadgets, like father like son, and the rest of us lft to play the role of the admiring crowd, with various degrees of envy.
This is why I am wary of the Slow Food movement, and its ever-growing presence in the discourse on regional development in Italy. Basically, what they do is this: they take good local food specialties – of which we have so many in Italy. They are good, they are healthy, they are prepared by local people on the basis of tradition. They are the result of centuries of trial-and-error. And they are cheap: we come from a recent past of poverty. People don’t make a big deal of this food, they just get it and enjoy it. Slow Food hypes it up, puts a guarantee brand on it, and makes sure it is prepared and sold by academy trained chefs in the world’s business capitals. Prices go up ten- or twentyfold, and the food does not get any better (I should know – I come from a farming extended family in Emilia Romagna. Believe me, my female relatives are world class food experts).
It gets worse. The various certification of origins, quality guarantees and the like are the prerogative of food produce that is produced following certain protocols: so they don’t only certify what you are eating, but how it was made. And this is key, beause it blocks innovation. if you want the certification you need to to thigns exactly by the same book as everyone else. The conclusion is that truly excellent products are not certified. The greater wines have no controlled origin, because winemakers experiment with grapes from all over the place to make their wine better. Paradoxical? Not really: certifications are not about good food, they are about higher margins. If some genius were to make a Veuve Cliquot taste alike for $3 a bottle; or a good Parmesan substitute with camel milk for $6 a kilo, no certification body would give them the time of the day.
Wrapping up: Slow Food, as so much of the so called taste industry, is trying – quite successfully – to market as luxury consumptions a good, cheap way if eating , invented by our forefathers who had very little cash and a lot of inventiveness. In so doing, it reduces the potential for this food to reach the masses, who are left with junk food. Furthermore, it takes away the incentive for innovation, making marketing investment on certification that shield existing products against new ones. A technology equivalent could be a certification for newspapers written on typewriters rather than computers (Slow Writing), or one for public authorities who do not issue information or certification online (Slow Service). Looks like a dead loss to me – something that public policy should actively discourage. But maybe it’s just I’m not getting it.