I have started reading Thorstein Veblen’s The Theory of the Leisure Class. The book was published in 1899 and was one of the earliest books to explore the classical economic concept that people wish to consume more.
I am finding it hard to read the book straight through (despite some classic satire), so I will break up my review into parts. This post covers the first five chapters. As I finish the book over the next week or so, I’ll post on the rest.
One of Veblen’s main contributions, forgotten by many neoclassical economists, was that people care about status, reputation and honour and that their economic behaviour will reflect this. As a result, people care about relative wealth.
To turn wealth into status and reputation, however, one needs to signal their wealth. The two signals that Veblen focuses on are conspicuous leisure and conspicuous consumption, with Veblen’s coining of the latter term being his best known claim to fame. A reading of the chapters on conspicuous consumption and conspicuous leisure suggest that Veblen has a relatively modern take on them. In particular, Veblen recognised the need for waste, which signalling theory tells us is required for the signal to be reliable.
Conspicuous leisure was something I had not thought a lot about before, but when there are few goods for conspicuous consumption, as would be the case in more primitive societies, conspicuous leisure would be a more accessible way to signal wealth. There are a number of conspicuous leisure activities that people undertake, such as reaching a level of manners and etiquette that could only be achieved through an excessive use of time, or becoming proficient at sports. Veblen also considers what he calls vicarious conspicuous leisure, whereby the head of the house employs servants (or even the housewife) in exercises that waste time.
As society advances, Veblen suggested that people move from conspicuous leisure to conspicuous consumption. Veblen’s primary explanation for this transition lies in the increasingly large circle of people with whom one associates and wishes to signal status to. In a small village, everyone is relatively familiar with each other and will note the habits of the servants and other householders carrying out the conspicuous leisure. In a larger city, however, the conspicuous waste needs to be visible, so conspicuous consumption in the nature of watches, clothing, carriages and the like are immediately obvious. Conspicuous consumption can also be vicarious, with servants dressed up in excessive livery.
Veblen considered that one major result of conspicuous consumption is that it will put to use all future growths in production and efficiency. He states:
The need of conspicuous waste, therefore, stands ready to absorb any increase in the community’s industrial efficiency or output of goods, after the most elementary physical wants have been provided for.
Veblen suggests that the use of additional production for conspicuous consumption acts as a Malthusian check on fertility. I think this point is very interesting. If signals are truly wasteful, then some of these resources will not be available for increasing the number of offspring. However, to be evolutionary stable, any reduction in conspicuous consumption by an individual would need to see them suffer a cost in the form of reputation and status, and in turn, mating opportunities. Veblen only mentioned this fertility check for the first time at the end of Chapter 5, so I am interested to see if he takes it any further.
I am also interested in whether Veblen explores the basis of the desire for status and reputation. As my previous posts suggest, I consider that it has biological foundations. From flipping through the book on previous occasions, Veblen had clearly read Darwin, although I am not sure to what use Darwin’s work has been put.
The link to a full review is here.