Conspicuous consumption luxury spending is not a good use of resources and is a negative externality. Some spending is very beneficial such as that on basic research or demand for healthy goods which leads to more production of that healthy good. Spending money on something signals that their is demand for that good or service so leads to more production of that good or time spent on that service. Society would be better off with more medical research and less yachts and JPEG NFT’s so we want to encourage spending on health instead of some luxury goods.
Conspicuous consumption luxury spending is not a good use of resources and is a negative externality. Some spending is very beneficial such as that on basic research or demand for healthy goods which leads to more production of that healthy good. Spending money on something signals that their is demand for that good or service so leads to more production of that good or time spent on that service. Society would be better off with more medical research and less yachts and JPEG NFT’s so we want to encourage spending on health instead of some luxury goods.