Potlatch Effect

Potlatch is a festival among the natives of the Pacific Northwest where a family or an individual establishes or exhibits his supreme status over his neighbors by throwing away his valuables. Though the wealth is shared in some rare cases, in most of the cases Potlatch was marked by burning material. Now, the basic idea should be something like this: I can continue to live (comfortably?) even without these items which are considered essential in the society. Sounds very stupid right?

But this effect continues to exist in other forms in almost all the cultures. Status symbols linked with waste of resources is quite common. Most of the Indian marriages can be labeled a distant cousin of Potlatch. All that needless extravaganza just for the visitors to go gaga! What's worse is that such events continue to raise the bar; money down the drain marriages are seen as benchmarks which the future event organizers will try to match or surpass. Consider tipping at restaurants - I don't have a problem with the waiters making some extra money. But the idea of showing off one's wealth by over-the-top tipping sets the snowball rolling and effectively raises the average because of peer pressure. In a manner of speaking, sometimes some people spending inline with their income can up the ante for those a rung or two below in the economic ladder who are bent on playing a cat & mouse game to catch up - only in the means of spending, but not in income generation. Modern day Potlatch is very vibrant. It almost makes someone frugal like me seem unfit to be a social animal.

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