Know your enemy - Symbolic Expenses

An article in The Age introduced me to a new term, "symbolic expense" which sounded interesting. To quote a quote about Private Schooling:

"Symbolic expenses are what we pay in service to an ideal that we hold internally but there may be no real connection between that money and any outcome on the ground," Gigi Foster

This is Foster's explanation for the incredible expense of ($547,414 per child - $10 billion PA for the country) that a significantly large number of Australian families commit too. It is a Symbolic Expense as there is no research to support such a decision as the student's outcomes are the same for the near free Public School when adjusted for socioeconomic factors. 

Intrigued I went hunting to find out more about this concept. Yet there isn't much material about it. Only a reference to a book called "Economic Theory of Greed, Love, Groups, and Networks". Coincidentally, this book was co-written by Foster herself. I have yet to read the book but it does indeed look fascinating. Here is a quote that cut to the core of the concept of Symbolic Expenses:
"If symbolic expenses are pure waste, then it should be a natural core activity of economists to say publicly that they are wasteful and to argue against them."

Well now that clears a few things up, a Symbolic Expense is "pure waste". So let's make a clear argument paraphrasing these two quotes in a rhetorical style:
"Private schooling is a Symbolic Expense.
Symbolic Expenses are pure waste.
Therefore rational parents should not send their children to private schools."

Now, that's how economists should start teaching the public. At the very least Economists should make it clear private schooling is not a middle-class product. Yet they don't, from what I can tell economists are more interested in advising companies and government, not the masses.

So where is the dissent, a voice to combat the expensive symbols that reduce the freedom of average workers? From what I can tell its a gap the FIRE (Financial Independence, Early Retirement) community is looking to fill. They alone are saying, "ditch the symbols and embrace your time". Don't buy new cars or buy an expensive house. These amateur economists, financial planners, philosophers are doing it for free and sharing their ideas for a more rational life for the average punter.

So what is Pure Waste, ahem I mean a Symbolic Expense? Well, Fooster and Frijters do suggest one way to detect them:
"One can ask a person making an expense that is suspected of being symbolic whether he has a rational story in his conscious mind" about how the expense is going lead to a good outcome."

In other words. Can you justify the expense based on outcomes. 

Beyond private schooling I cannot find a list of tangible Symbolic Expenses so here is a quick list of some potentials,
  • Fancy car (brand, new, luxury)
  • Fancy house (i.e. ones with a fancy facade)
  • Weddings (especially photography!)
  • Fancy Watches (> 20 bucks), Jewellery
  • Top Ranked Universities
  • Pure Breed Dogs \ Fancy Vet Bills
  • Holiday House
  • Boat
  • Art
  • Club Membership (Gyms)
  • Travel (potential, i.e luxury hotels, going to right places like Nice or Noosa)

Most of these expenses are unlikely to do thermonuclear damage to your balance sheet like private schooling. The only thing possibly worse is a gambling addiction. Most middle-class workers could easily accommodate a couple of these symbols but not all. However, I have witnessed once you're in the symbolic game it can be hard to escape so be wary.

The marketing of these symbols is so powerful and I am weak to combat them, so I have devised the following to help me re-orient myself when I am weak:
There is no rational reason for owning a Sports Car.
Expenses that solve no problems are Symbolic.
A Sports Car is a Symbolic Expense.
Symbolic expenses are pure waste.
A Sports Car is pure waste.

This article was updated on January 3, 2019