As is his wont, Tyler Cowen has a very thought-provoking post on the economics of haute couture. I have wondered recreationally about this myself, given that I am an avowed shoe (boot, really) fiend and love the visual, tactile, and psycholgical aspects of dress.
The one-off couture for the runway creates the buzz, but only if you can get a critical mass of Beautiful People to attend your shows. I think this typically happens by said Beautiful People, or friends of Beautiful People, having experience with your prêt-à-porter line. In that sense I think the buzz of fashion has some of the increasing returns characteristics we associate with networks: the experience creates the demand that creates the buzz that creates the experience that creates the demand …
There’s also a repeated game/reputation element to it. Look at the long-established Beautiful People/Designer relationships, like Michelle Pfeiffer and Giorgio Armani. MP has a fantastic sense of what flatters her (and a bone struture that means a paper bag would flatter her), GA’s stock in trade is providing precisely that elegant, minimalist, tailored look with fabrics that look and feel gorgeous. Beautiful People and Designers who find these mutually beneficial relationships benefit greatly. Clearly, this aspect of it is closely related to the brand image creation that Tyler mentioned.
But that gets us to what I think is the most challenging and provocative thing that Tyler said in this post:
So much of economic activity is about buying dreams, and we don’t yet have to analytical tools to analyze this kind of problem.
Uff-dah, what a big thought.
Makes me wonder if a neuroeconomics study of fashion would tell us anything: does shopping at the Gap for white t-shirts stimulate a different part of the brain from shopping at Hermes? Or more generally, what part of the brain does shopping, or looking, or trying on different types of clothing, stimulate? You could ask the same thing of cars.
I think the consumer preferences underlying shopping and fashion are hugely complicated, and hard to disentangle. One reason for that is very similar to what I discussed with my students today about contingent valuation studies to determine the value of environmental amenities: our preferences are constructed, and are highly contextual; they aren’t just written in a book or tattooed on the back of the neck. In many cases we don’t even know what our preferences are over something until we are confronted with it. And then once we are confronted with it, we do the “compared to what” opportunity cost calculation, and choose whether or not we want to buy it. We may not be able to articulate all of the aspects of the choice, either.
Just like the desire to preserve charismatic megafauna, fashion also has a very visceral, emotional component to consumer preferences, something that reaches into the core of our souls and taps into the human desire to do things with our resources that represent something about our individual beings.
Unlike fashion, though, environmental amenities are non-market goods; markets do not typically exist as mechanisms to enable us to determine how we value them, and whether others value them more or less than we do.