Gifts And Consumer Durables: A Meditation With Adam Smith

The end-of-year holidays are a time for giving gifts, which raises an ongoing question. Do you prefer experiences, like a restaurant meal, a kayak tour, a night at a bed-and-breakfast? Or physical objects with a limited life expectancy, like a sweater or a cooking pot, that will be consumed over a longer time? Or do you sometimes desire an object that will last for decades, even to the next generation? My family uses a dining room table that belonged to my grandmother: my wife has over the years picked up some vintage flapper dresses from the 1920s and 1930s in which she looks especially fabulous, and which have been on occasion loaned out for high school proms to fortunate members of the next generation; and we have a hallway in our house of family pictures, including some inherited from earlier generations. 

In thinking about tradeoffs of any kind, it will surprise no one who knows me that I find myself turning to Adam Smith's 1776 magnum opus, The Wealth of Nations. In Book II, Chapter III, Smith writes "Of the Accumulation of Capital, or of Productive and Unproductive Labour." As you might expect, Smith argues that spending on durable commodities, rather than things that are consumed immediately, is better for the economy. I quote here from the text at the Library of Economics and Liberty website:  

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