The author examines the paradox of very poor households, spending large sums on celebrations. Using qualitative, and quantitative data from South India, the author demonstrates that spending on weddings, and festivals can be explained by integrating an anthropological understanding of how identity is shaped in Indian society, with an economic analysis of decision-making under conditions of extreme poverty, and risk. The author argues that publicly observable celebrations have two functions: they provide a space for maintaining social reputations, and webs of obligation, and, they serve as arenas for status-making competitions. The first role is central to maintaining the networks essential for social relationships, and coping with poverty. The second is a correlate of mobility that may become more prevalent as incomes rise. Development policies that favor individual over collective action, reduce the incentives for the networking function, and increase the incentives for status-enhancing functions - thus reducing social cohesion, and increasing conspicuous consumption. Market-driven improvements in urban employment, for example, could reduce a family's dependence on its traditional networks, could reduce incentives to maintain these networks, and could reduce social cohesion within a village, and thus its capacity for collective action. In contrast, micro-finance programs, and social funds try to retain, and even build a community's capacity for collective action.
