The essence of Joan Robinson’s complaint about utility theory was that it is possible to construct a utility function to justify any conceivable behavior: Just assume that the behavior in question yields more utility than its alternatives. Any postulated utility function, or proposed modification to a standard utility function, should therefore be defensible on grounds other than its ability to match the facts it was created to match. This section argues, using a variety of informal evidence, that most qualitative descriptions of the behavior of the wealthy, both by the wealthy themselves and by outside observers, can be interpreted at a fundamental level as implying that wealthy people derive utility either directly from the ownership of wealth or indirectly, either from the activities that lead to wealth accumulation or from a flow of services that is closely tied to the ownership of that wealth.
The first important argument about the plausibility of the Capitalist Spirit model concerns the assumption that the marginal utility of consumption decreases sharply with the level of consumption. What matters critically here is really the assumption that there is an alternative way to employ wealth whose marginal utility decreases more slowly than that of consumption (and hence will be a luxury good relative to consumption). It is important to recall that the kind of consumption treated in the model is for strictly nondurable goods and services. Carroll and Inhaber (1992) note that “luxury” goods that are generally associated with the wealthy such as art, estates, jewelry – even sports teams – are almost all assets. Indeed, beyond a certain level of wealth it becomes difficult to imagine how one could spend even the earnings on one’s wealth on nondurable goods and services for personal enjoyment. For example, recent press accounts have estimated Bill Gates’s net worth at $40 billion. Assuming a ten percent annual rate of return, Gates would have to spend $4 billion a year, or over $10 million a day, on nondurable goods and services simply to avoid further accumulation.