If a rich person spends $200 million on a painting, someone else gains ~$200 million. If a rich person spends $200 million to build a yacht, many resources are exhausted on yacht building rather than being allocated to something that helps people. This distinction matters.
Someone should compile a list of the social marginal cost of different types of consumption (have they?). How much spending is like art (i.e. transfers) and how much is like yachts (i.e. consuming scarce resources). How does this proportion vary as people become wealthier?
This distinction is important for thinking about optimal taxes as well as for individuals deciding what to consume. Social judgments about wasteful and lavish consumption seem not to track underlying marginal costs, but this is an error.
We should have high consumption taxes for things like yachts or 2nd or 3rd or 4th houses that are consumed by rich people, but lower (still high?) taxes for paintings or historical memorabilia or jewelry that is cheap to produce (and doesn't have production externalities...)
If you buy a mansion, society loses time and stuff. If you buy an expensive wine, this may not be the case. If the wine is cheap to produce but expensive due to rarity, good news! Your consumption isn't hurting anyone except others who want that wine (who cares about them).
If you buy a first class plane ticket... it's complicated! Maybe it's mostly mark-up? Real estate in a good location... also complicated (what is alternative use of location?). More research should compute social costs of consumption.
