The Economics of a Frivilous $8,000 Purse

Gary Nolan (and THE Scrappy Doo)
Gary Nolan (and THE Scrappy Doo)

Recently, a socialist-minded coworker was having a discussion in the office, and indicated she was disgusted that a famous celebrity bought a new purse, costing thousands of dollars. They said something to the effect of, “Yeah, that’s why the rich need more tax breaks, so they can buy expensive purses” followed by a pejorative laugh.

So I did a Google search for this purse company, Bohlux. As it turns out, they are made here in the United States. Certainly I think $8,000 is a ridiculous sum of money for a purse, but I’ve always told people that it’s important to understand that “expensive” is a relative term. Since I am fairly poor, I couldn’t dream of spending money on something like that, but to someone who makes several million dollars a year, it is less than a week’s pay, meaning that $8,000 to her was like me buying a nice dinner.

Bohlux Structured Hand Bag
Bohlux Structured Hand Bag

My left-wing cohort’s argument of course, is that the money would be better spent in the form of taxes to assist solving every American’s problems at the government level. But let’s think about what would happen in the two scenarios for a moment.

If that money went to the government, it would end up in places like Solyndra. It would end up in the hands of entitlement abusers such as welfare fraud perpetrators or unemployment collectors who could work, but choose not to. It would end up in the pockets of politicians. Or it would end up supporting a myriad of other wasteful government programs—the list goes on.

I’m not condemning all government functions, I do believe that there are some good roles for Uncle Sam, and there is a need for taxes to pay for those services. I’m a libertarian, not an anarchist.

I am not trying to assert that the above list is representative of the whole of government or even the majority of it, but it is a substantial portion. The problem is, virtually none of those people or causes actually did anything to earn that money and therefore should have no right to it.

On the contrary, if a millionaire buys an expensive purse, an American purse maker made money, the store that sold it made money, the employees of the manufacturer and the store got paid. Then all those people probably spent that money on goods and services at local stores who also made money…and the cycle just keeps going into a nice, free-market, economic circle. The most important part of that though, is that the people in this scenario did actually earn that money.

The fact is that the people who get mad at rich people blowing their money on frivolous items don’t seem to get how that helps the economy. The money they spend literally creates jobs because someone is performing the service they are paying to receive or building the product they are buying, where entitlements simply delay the inevitable.12627-highlights-rockstud-craftsmanship[1]

If rich people just sat on their money and stuffed it in a mattress, then yes that would hurt the economy, but that rarely happens. The rich invest their money, they spend their money on needs, they build companies that create jobs, or they enjoy it through wasteful spending on purses and such.

We covered how spending helps, but investing helps too of course.

If they buy a million dollars of stock from a company, that company uses that money to grow their business, often in a new direction. That results in the company hiring new employees which is also a boost to the economy.

Standard Oil Common Stock
Standard Oil Common Stock

If they buy stock from a private owner, that person now has cash in their hands to spend on goods and services, which again creates jobs.

People often refer to the term “Income redistribution.” I think the term is inaccurate because both situations redistribute wealth. However, the system those of us on the small government conservative side promote redistributes it to people who earned it, whereas our big government friends redistribute it to those who didn’t.

So when they talk about “fair share,” I’m sorry but their understanding of the word “fair” is grossly misappropriated.

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