A Reasonable Approximation

Against boots theory

The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.

Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.

But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.

This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.

– Terry Pratchett, Men at Arms

This is a compelling narrative. And I do believe there's some truth to it. I could believe that if you always buy the cheapest boots you can find, you'll spend more money than if you bought something more expensive and reliable. Similar for laptops, smartphones, cars. Especially (as Siderea notes, among other things) if you know how to buy expensive things that are more reliable.

But it's presented as "the reason that the rich [are] so rich". Is that true? I mean, no, obviously not. If your pre-tax income is less than the amount I put into my savings account, then no amount of "spending less money on things" is going to bring you to my level.

Is it even a contributing factor? Is part of the reason why the rich are so rich, that they manage to spend less money? Do the rich in fact spend less money than the poor?

That's less obvious, but I predict not. I predict that the rich spend more than the poor in total, but also on boots, laptops, smartphones, cars, and most other things. There might be exceptions where rich people consume less of the thing than poor people - bus tickets, for example - but I think if you group spending in fairly natural ways, the rich will spend more than the poor in almost every group.

• Maybe they spend less money on their daily wear boots, but own more pairs of shoes for different occasions. Or maybe they decide that they care about other things than lifetime cost for their daily wear boots, and spend more on those, too. (Being rich means they can afford to care about other things than lifetime cost.)

• Apparently famous people often get comped meals, but I bet most of them still spend more money on food than I do.

• I spent £500 on a laptop in 2013, and before that, £300 in 2008. If I'd gone for £200 laptops each time, maybe they would only have lasted two years each. But if I weren't a techno-masochist, maybe I'd realize that using old laptops actually kind of sucks, and I'd upgrade far more often. My work laptop, bought by people who want me to be maximally effective at my job, cost over £1000 and isn't going to last ten years.

• Financial services are a case where I'd guess the rich and the poor spend money on very different things. I assume the rich don't have to pay to cash a cheque, and very rarely visit loan sharks. But the poor rarely have Amex Platinum cards ($550/year), or personal accountants. (Maybe it's unfair to count those because they save you money in other areas?)

• Buying a house may be cheaper in the long run than renting a similar house nearby. But rich people tend to live in nicer houses and/or nicer areas.

Those are all guesses. I don't have good data on this, and I'd love to see it if you do.

For what data I do have, the first google result was this page from the UK's Office of National Statistics. Specifically, look at figure 4, "Indexed household income, total spending and spending by component by income decile, UK, FYE 2019".

They split households into ten income levels, and look at four categories of spending plus total spending. Each of those is a near-strictly increasing line from "poor people spend less" to "rich people spend more". (I see two blips: the 90th percentile of income spends slightly less on housing than the 80th, and the 70th spends slightly less on food and non-alcoholid drinks than the 60th. The other categories are transport, and recreation and culture. These four are the largest spending categories on average across all income levels. The graph also has disposable income, which I think is irrelevant for current purposes.)

(I repeat that this specific data is not strong evidence. The source for it is the living costs and food survey, which might have more detail. (Link goes to the previous year's version because that's what I could find.) Unfortunately it's not open access. It might be freely available if I register, but I don't care enough to try right now. In any case, we'd also want data from outside the UK.)

There will obviously be some exceptions. There will be some rich people who spend less money than some poor people. There will probably even be some rich people who spend less money than some poor people, and would not be rich otherwise. But as a general theory for why the rich are rich? I just don't buy it.

I believe boots theory points towards one component of socioeconomic unfairness. But boots theory itself is supposed to be a theory of why the rich are so rich. It's very clear about that. It's clearly wrong, and I predict that even a weakened version of it is wrong.

To be a little more precise, I think boots theory as written makes three increasingly strong claims, that we could think of as "levels of boots theory":

1. Being rich enables you to spend less money on things. (More generally: having incrementally more capital lets you spend incrementally less money. Also, being rich is super convenient in many ways.) This phenomenon is also called a ghetto tax.
2. Also, rich people do in fact spend less money on things.
3. Also, this is why rich people are rich.

All of these levels have stronger and weaker forms. But I think a quick look at the world tells us that the first level is obviously true under any reasonable interpretation, and the third level is obviously false under any reasonable interpretation. The second I predict is "basically just false under most reasonable interpretations", but it's less obvious and more dependent on details. There may well be weak forms of it that are true.

It may be that most people, when they think of boots theory, think only of levels one or two, not level three. I don't know if you can read this quora thread that I found on Google. It asks "How applicable to real life is the Sam Vimes "Boots" Theory of Economic Injustice?" The answers mostly agree it's very applicable, but I think most of them are on level one or two. (The one talking about leverage seems like level three, if it's talking about boots theory at all. I'm not convinced it is.)

But it seems to me that boots theory is usually presented in whole in its original form. Its original form is succinct and well written. When people want to comment on it, they very often include the very same quote as I did. And the original form starts by very clearly telling us "this is a theory of why the rich are so rich". It is very obviously level three, which is very obviously wrong.

So I have a few complaints here.

One is, I get the impression that most people don't even notice this. They link or quote something that starts out by saying very clearly "this is a theory of why the rich are so rich", and they don't notice that it's a theory of why the rich are so rich.

(I wouldn't be too surprised (though this is not a prediction) if even the author didn't notice this. Maybe if you had asked him, Terry Pratchett would have said that no, obviously Sam Vimes does not think this is why the rich are so rich, Sam Vimes just thinks this is a good illustration of why it's nice to be rich.)

This disconnect between what a thing actually says, and what people seem to think it says, just bothers me. I feel the desire to point it out.

Another is, I think there's a motte-and-bailey going on between levels one and two. A quora commenter says it's "far more expensive to be poor than it is to be rich, both in a percentage of income respect and a direct effect". He gives examples of things that rich people can spend less money on, if they choose. He doesn't provide data that rich people do spend less money on these things. Another describes how being rich lets you save money on food staples by stocking up when there's a sale. He doesn't provide data that rich people do spend less money on food or even staples. You could certainly make the case that neither of these people is explicitly claiming level two. But I do think they're hinting in that direction, even if it's not deliberate.

And relatedly: if we want to help people escape poverty, we need to know on what levels boots theory is true or false.¹ If we want to know that, we need to be able to distinguish the levels. If "boots theory" can refer to any of these levels, then simply calling boots theory "true" (or even "false") is uninformative. We need to be more precise than that. To be fair, the quora commenters make specific falsifiable claims, which is commendable. But the claims are meant to be specific examples of a general phenomenon, and the general phenomenon is simply "boots theory", and it's not clear what they think that means.

I advise that if you talk about boots theory, you make it clear which level you're talking about. But maybe don't use that name at all. If you're talking about level one, the name "ghetto tax" seems fine. If you do want to talk about levels two or three, I don't have a good altiernative name to suggest. But since I don't think those levels are true, I'm not sure that's a big problem.

Posted on 14 September 2020

Tagged: economics

Comments elsewhere: LessWrong; /r/slatestarcodex