Fashion Cycles in Economics

Keywords, JEL Codes THE RAISON D'ÊTRE FOR SCIENCE, AND ECONOMIC ANALYSIS IN particular, is to understand and explain observable phenomena. Yet, in an article in the American Economic Review, Wolfgang Pesendorfer (1995) develops a model of the design cycle of fashion goods that shows little regard for data, observational experience, history, intuition, or semantic integrity. These cornerstones of scholarship are superceded by the quest for a mathematical argument sustaining certain preconceptions. Throughout the paper there is an unmistakable animus against fashion; in the abstract, Pesendorfer notes: “The paper gives conditions under which all consumers would be better off by banning the use of fashion”(Pesendorfer 1995, 771). A quote from Georg Simmel reinforces this negative view of fashion: “Judging from the ugly and repugnant things that are sometimes in vogue, it would seem as though fashion were desirous of exhibiting its power by getting us to adopt the most atrocious things for its sake alone” (Simmel [1904], 544; quoted in Pesendorfer 1995, 771). This sets the stage for constructing a model where fashion serves no purpose other than social differentiation. Relying on Simmel, Pesendorfer introduces fashion as a way in which people distinguish themselves from others. * Coelho and McClure: Department of Economics, Ball State University. Klein: Department of Economics, Santa Clara University. PHILIP R. P. COELHO ET AL. The purpose of fashion is to facilitate differentiation of “types” in the process of social interaction. The demand for new designs is derived from the desire of agents to interact with the “right” people. (Pesendorfer 1995, 772) Here the similarity with Simmel ceases. Confusion results from Pesendorfer’s going back-and-forth between “fashion,” “garment,” and “design.” The only aspect of a fashion garment that is important in the model is its “look” or design. Unlike real-world garments, Pesendorfer’s “design” does not comfort, protect, warm, or beautify; neither does it generate prestige nor ostentation. It is best to think of a “design” as something like a ticket that lets the buyer enter into interaction with other ticket holders. Pesendorfer uses the terms “fashion,” “garment,” and “design” interchangeably because, in the model, they all mean simply the ticket to mix with other ticket holders. The design is the basis for a never-ending compulsory matching process that establishes two-person groups. There are numerous problems with the model: (1) There is neither a definition, nor an elaboration of, the phenomena modeled; (2) alternative explanations of fashion cycles are ignored and even deliberately elided; 1 (3) the model of fashion as a signal is so abstract that it has no observational counterpart in reality; and (4) real time does not exist, and neither memory nor history exist. 1 Pesendorfer draws heavily upon Simmel, but misquotes Simmel in a way that makes it appear that Simmel’s ideas are as one dimensional as Pesendorfer’s. On page 771, Pesendorfer shows a block quotation from Simmel. But looking up the quote, we found that he had edited out, without inserting ellipse to indicate omissions, “the desire for change” as an impetus for fashion. Below is the exact quote from Simmel ([1904], 543) with the text omitted without indication by Pesendorfer shown in bold italics: [Fashion] satisfies in no less degree the need of differentiation, the tendency towards dissimilarity, the desire for change and contrast, on the one hand by a constant change of contents, which gives to the fashion of today an individual stamp as opposed to that of yesterday and to-morrow, on the other hand because fashions differ for different classes—the fashions of the upper stratum of society are never identical with those of the lower; in fact, they are abandoned by the former as soon as the latter prepares to appropriate them. ECON JOURNAL WATCH 438