VEerElI INT

Prem ExcusH
A Complete
Introduction to
Thorstein Veblen's
conomlcs

Ken McCormíck

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xxvi VrmpN n't PrarN ENcusH

human being. A:rd, decidedly, the result

has been an
amelioration of the lot of the less favored
in a rela_
tively greater degree tiran trrat of those economicailv
more forhrnate. The claim that the system
of
petition has proved itself an engine
for making"o*_ the
rich riclie¡ and the poor poorer has the fascination
of
epigram; but if its meaning is that the
lot of tl:e aver_
age, of the masses of irumanify in civilised
life. is
wor:se today, as measured in the ."ü, ortiffi#iüJ^
tha:r it ,"vas twenfy, or fifty, or a hundred
then it is farcical [1919, 391].
yrurc ugo,
Penr I
capitalism has without a doubt improved
the materiar standard
Iwsriucrs
of living of the average percon. Its probrems;and AND INSTITUTIONS
deficiencies rie
elsewhere.
The begi*ing of the hventy-first centuiy
finds us witrr no serious
altematives to capitalisrn. various politicar Ultimately, economics is about human behavior. That is wliy ev-
factions agitate for change
of greater or lesser magnihrde. But onry ery system of economic analysis rnust include a description of how
*.ue ideologues, blind to his-
tory, really believe that a fi:ndamentalry people behave. Not surprisingly, different schools of thoughr pres-
different system would nec_
essa'ily be an imp'ovement, or trrat ent very different views. Before we look at Veblen's ideas on the
it courd be brought about without
enonnous bloodshed. That makes subject, it rvill be instructive to examine the views of the fwo major
veblen's approach and a'arysis alr
the more valuabre. He made no schools of thought that existed at the time Veblen was writing. As
attempt to consfruct castres in tire air
to which the márch of rristory is we shall see, the contrast with Veblen is stark.
ine'itabry taking us. There is onJy trre
hard business of looking at human Neoclassical economists had an extraordinarily simple view of
society as it is and trying to make
sense of it' As Diggins put human nature, which they believed to be the same at all times and
it, "capitarism is something we must ream
to live with fand that] makes places. People, because they are people, were all assumed to be
vebren's criticar perspectives more per- util-
tinent tllan ever" ity maximizers. That means that all behavior can be explained as ra-
[1999, xxix]. Veblen,s approach offels an antidote
to the tired ideologies espoused tional attenipts either to obtain pleasure or to avoidffi*Economists
by trre demagogues wrro dominate
public discourse.
of the time wrote about people as hedonistic utility maximizers in
stark terms. Edgewofth, for example, spoke of humans as "pleasure
machines" fEdgewortir, 1881, 15]. People calculated the likelypiea-
 { VELtsEN IN TLAIN ,trNOL¡SH
I¡ts I incts a nd I ns t i tut io ns
3 A¡4¡r'
sures and pains associated
with various actions, and the'chose
the down upon him, whereupon he follows the
3 ones that gave trrem the line of
most preasure. To be fair,
it should be noted the resultant. When the force of the impact
tllat defenders of this hedo'istic is spent,
3 approach argued that ,,preasure,, he comes to rest, a self-contained globule of
included mental and spirituat desire
pt.urur. as welr- as physicar as before. Spiritually, the hedonistic man
D lMill, 196l, lg5]. -- r"r s¡vu¡ preasure
P is not a
prime mover. He is not the seat of a process
of living,
I The idea that peopre onry
as absurd' The neocrassicar
react to preasure a'd pain
struck vebren
except in the sense that he is subject to a
series of
permutations enforced upon him by circumstances
t approacrr presents peopre
active agents' veblen berieved
as passive, re_
that a person..is not simply
extemal and alien to him
fVeblen, lglg,73_4].

I of desjreb that are to be saturated...

a bundre
but rather a coherent structure Partly because of vebren's satire, modem neoclassicar
econo-
of propensities a'd habits whicrr
I unfolding activiries"
seek rearization and expression
in
mists no longer openly embrace Edgervorth,s
human nature' Modem neocrassical economists
shocking view of
[1glg, 74]. If there were no preasure to be continue to assume
had
0 or pain to be avoided, wourd
we reary sit stit and do nothing that people are utirity maximizers, but they
at
craim that it is onry a
all? Moreover, do people modeling device. In other words, they do not
D really make the calculations openly say that people
required to
maximize utirity? vebren really are pleasure machines. The assumption
satirized the hedo'istic view is made because, in
D nature in a famous passage
of huma'
that illustrates both his biting their view, models based on the assumption
wit a'd rhe of utility maximization
il difficulry of reading his prose: predict well. The approach is defended in
Milton Friedman,s famous
The psychological and article, "The Methodorogy ofpositive Economics"
il preconcep_ [1953]. Friedman
-anthropological
tions of the economists have argues that 4 model;s abiliry to predict is the
onry thing that mafters
I accepted by the psychological
been those which were
and social sciences in judging how good the model is. In liis
view, the realism of the as-
some generations ago. The sumptions is irrelevant. It follows thaf one can assume
D hedonistic conceprion ol whatever one
man is that of a lightning calculator
of pleasures and wants about huma' behavior as iong as one's
t pains, who oscillates like
a homogeneous globule
of
moder predicts weil.
what is left unspoken is the fact that whiie the approach
of happiness under the impitse may
) *:l*
shift him about the area, but
of stimuli that useful for predicting seasonal variations in the
be
le"ue him intact. He has consumption of ice
neither antecedent nor consequent. cream' it is not capable of addressing more fundamental
t definitive hurnan datum,
He i, un irolut.il
such as the evolution of economic institutions.
questio's
in,táUtr .quilibrium excepr For veblen, these
l for the buffets of.the irnpingiü
forces that displace
liim in one direction o. uno,-lr.i.i"lf-irnposed
more fundamental questions were of primary
importance.
l emental space, he spins ,y*..t.i"ully
in el_ The main alternative to neoclassicar economics
at the time was
spirirual axis until ü."
of"b;;;l;;;;;
the economics of Karr Marx. Marx was
I o*"iiJ;;; forces bears inte¡ested in some of trre
same basic quesiiors as veblen, but took
an approach different from
)

i;,.
 VrrneN nJ Pr¡N ENcuss
Instittcts and Insli tulions

both Veblen neo,classical economists. ,fr-t,.F,(L'/>

"rq2il" In Marx,s view, one,s . Instincts are mucli"broa'der than the simple pleasure seeking /
behavior ir{"¡'áprt ¡v *¡rlt."-;;;".rr. How o'e acts and thinks tffiiinavoidance of the neoclassical school. There are many
depends on one's social different
class. workers thinr< differentry
because trreir experiences
trran owners facets of human nature. We are complex beings, and our instincts
are so different. Ironicary,
the onry trait may sometimes even contradict each other. To understand human
common to at classes is
one that wourd be right
ut¡;,r1-r"in neocras- behavio¡ we must begin by examining instincts and instirutions.
sical anarysis, nanrery rationar
self-interest. á^rrffioccurs
different classes fight to as
advance or to protecJ their
interests. The idea
of class struggre crearly presupposes
that members of each crass
dersLand their interests. un_
This means that they are
capabre of penerat_
ing the veneer of r

Ashisrory,.";:'."3,illffi
According to Mau, human
ffi lfi :::lTJ:::l,o,,,.ouog.
behavior must inevitably
crrange as werl
because extemar conditions
detemine how peopre think.
As Marx fa,
mousry put it, "It is not tbe
consciousness ofmen
that determines their
existence, but, on the
contrary trreir sociar existence
that determines
their co¡sciousness"
fMarx, r g59, 4]. u'rike the neocrassical
posits an unchanging view that
human nature, Marx believes
that hurhan nafure
is a product of the
vi ew i s tjr ar h um
ffi #
an *ffi;1T#y;l;"T:,:::
:: :
Marx's view is that it is
determined comptetely
by nurhrre.
veblen's view of human

*-;;/,, ffi::::T:ffiT"##ffi,i:iffiT:
behavior is more compiex
either the neoclassic than trrat of .

nate behaviorar tendencies

that vebren cated instíncts.
themselves s,bject Instincrs are
to evolutionary crrange
over Iong periods of time.
Nurfure, in the form
of institutions ur.lr-u, leamed
and social conventions, habits of tirougrrt
arso influe'Ce our
berravio¡. I¡sdrutions can
also evolve arrd change
over tir¡e.
 a,

1 Instincts
rc.
J The last point must be stressed.
our instincts direct our behavior
3 in that they provide goars fo¡ our
actions. we use our reason to help
us figure out rrow to meet trrese
3 goals, but reason is subservient
to our
p
;HHi'
'' fi take &a|ffi#*:*ffii:fi:l,Hi
il:' T
J*
*t
v thought of, and how and ro
what effect,,tlbid. 61.
CHAPTER
W'Wall
broaory speakng,
Í
Él i there are two categories of instincts.
one set
of instincts is group-regarding,
and seeks to promote human life in
I INsrmcrs general' The seco'd set
of instincts is self-regardi'g, a'd promotes
h
the individual's interests at the expense
of othe¡s. It must be under-
stood fi'om the beginning that
as active
agenrs. rhey have ,,propensiries these
instincts are not independeut and
D ,Yoejff1; :"::0,, an{ isolated from one anothe¡.
They sometimes augment and sometimes
l fvebren,,n,n,r,.Ttl',i11i,,..1,ffiffi contradict eacir other' As
a moment's ¡eflection win
no doubt revear,
;il::::-;:,T,,?; human beings are sometirnes
torn by con_flicting aims.
) .ul.ul",ioo. Even in flre
flH:,ffi*.rreasure_pain ubr.n"" of Human instincts are the product
I "do somethins'" Thev of human evolution. It makes
F tendencies ,nu,.#
Veblen defined
ilT:::i have in'are sense that both serf-regarding
and group-regarding instincts evorved.
instincts as ,,the nnate- witirout self-regarding insti'cts,
,
innat and persisrenr individuals would'ot survive. But
of human nature,, propeusiries
i
;;;;"::"_¡re for humans, i'dividuar survivar
arso depends on the survivar of trie

;:H*: # ff"-;l;3i1ff",,:
needs
ofan
of
#:,1:
too imprecise a character
;:: **:
to serve dre
group. We a¡:e'ot solitary
the destruction of the group
beings. Human life is lived in groups,
generally means the destruction
individual' Recent a'trrropological
and
of the
psychological
"**.r,.'j1l'is analysis,, resea¡crr suggests that during the
the word r"r'*i"l"e [bid. 2J. Veblen used
Iast glacial period, there
was a strong selection process in
favor of
il#ffi T[$il:ffi ::"H::l,n::"*L1H::n:
those willing to engage
in cooperative behavior. Faced witir
a harsher
climate and more difficult
living conditions, $oup sorid.arity meant
,T11.*:
rng "",,"",
one's hand
ffiffil:""ffi*iil'ffi;: _ff:l*;; individual survival
fAmbrose, 2002, ZZ]. AsAmbrose.put it, ..our
away from ancesto.s made tire transition
cons ci ousness
n"r r,"".. i,
a to cooperative networking societies
andprovi de u,*i" pu.Jr::Til:JilH: early in the last ice age'
"
r,
ffi_ troop-to-hibe transition,,
Neanderthars never achie'ed *nul, carl this
[Ambrose, 2005].
I
i

I
I
l:l:
 \/-,--.. n
Y trLUL,N ---
IN J-LATN I,NCLISH
Instü'tcts

Human instincts continue to evorve,

but trre process is slow, per-
preference. Neoclassical economists generally assume that people
iraps too sr.w to matter for
any period of time short of many
centu- prefer present goods to fufure goods. ln other words, we would rather
ries' As a resurt, vebren sees
instincts as more or less constant
for the consume now than later. As a result, people must be paid interest to
pulpose of exarnining the
economy. The evorutio'of our
instincts is induce them to save because saving requires us to delay consump-
not the source of change in moclem
economies.
Prominent among our group-regarding tion. veblen contended that our concern for the young might induce
instincts is the i'nate hu-
us to save and invest simply in order to acquire more wealth for our
man propensity that vebren calred
"parental bent.,'parentar bent
is chiidren. As Veblen said about our parental bent.
nruch more than rhe .,quasi_tropismatic .
impulse,, [1914, 261to pro_
create' It incrudes not only the In the simplest and unsophísticated terms, its func-
desire to take care of one,s own
chir_
dren, but arso a broader concem tional content appears to be an unselfish solicitude
for tire ch'dren ofone,s exte'ded
family, tribe, nation and even for the well-being of the incoming generation - a bias
humanity i'generar. Veblen notes
thai for the highest efficiency and fullest volume of life in
it is "despicably inhuman"
[Ibid. 26) for one generation willfully to the group, with a particular drift to the future; so that,
make life harder for the next generation.
Hence, we feer obriged not under its rule, contrary to the dicfum of economic
o'ly to provide things rike food, ciothing theorists, furure goods are preferred to present goods
and sherter for ch'dren,
but we also view it necessary to lrbid.46].
provide the proper education
and
trai'ing so that trre'ext generatr'on
rvili be abre to take care of itserf
when the time conres.
Note that we do trrese things not
because of rationar carcuration,
but because if is instinctive. It
is part of'bei'g human, and without
it the race courd not have survived.
our parental bent means that,
c.ntrary to the view of neocrassical
econohics, serf-interest is not
the only thing tlrat motivates
peopre. v/e instinctivery
care for others,
especially tl-re young, to
at least some degree. It is
not at a, unusual
for parents to sacriñce tireir
own consumption for trre benefit
children' People can be
of their
induced to vote money for
befter schoors or
to donate m.Dey to
orphans with the srogan, ..do
it for the ch'dren.,,
Veblen pointed out that
our parental instincts run in direct
position to the common op_
neocrassicar assumptio'
of positive time
 10
a Ve¡.srN r¡v purru ENcrrsu
Instittcls l1
? The instinct of workmanship is
closery related to ou¡ parentai
The third of the group-regarding insrincts is wliat veblen calls
3 bent and it also wo¡ks for the
common good. The.instinct of
work- , "idle curiosity." Idle curiosity is the idea that people "want to lmow
p manship can be defined as "a taste
for effective work, and a distaste
things, when graver interests do not engross their attention"
for futile effort" flbid.
fvebren, lggg, r5]. people have an instinctive
E af_ 85]. Peopie are instinctively curious abour their world. The idea tlrat
fiairy for efficiency and a dislik.-
,f ##i"#{{ánfiniry ;;;;.,r* people are innately curious did not originate with Veblen, and is in
the species ro survive. There
B is an intrins ifrfirr'{r"iurá
*irr, aoio, fact very old. Aristotle, for example, begins his Metapliysics with
something usefur' As most peopre
know, not alr work is painfur.
s farmers get satisfaction from growing
Most the sentence, "All men by nature desire to know"
Ii994, 1552]. To
crops. Automob'e mechanics be human is to u,ondér, to want klow. We are a curious species.
p feel a little pride when tirey
make a repair. professors are i'wardry The immediate reason we want to know is simpre curiosiry, with
pleased when they deriver good
¡t a recfure. ',Do-it yourserf ,projects no utilitarian motive. As economic historian Joel Mokyr notes, ,,use-
are popurar in part because
people enjoy building and creating. ful knowledge, more often than not, emerges before people know
That
o is nof to say that work is arways
fun. It certainly is no' But we feel what itwill bquse¡! for'.'12002,^294).Tbe inventor of the laser, for
an intrinsic need to do something pQludt:¡,á1,$,-r"r{i.l-*x-.t
0 useful. As much as we rike to ,
example, was te'ased by hi5 colleagues that his invention had no use,
"goof-ofl" most of us feel at reast
a littre guilry about wasting and was "a solution Iooking for a problem" [The Economist, z00sa,
D time.
lve distike pointress bureaucratic paper-pushing
because it doesn,t 25]. It now iras an astonishingly large numbe¡ of appiications rang-
il seem accomprish anything.usefur; it
is a waste of rruman effort. ing fi'om weapons to rnedical devices. Veblen points out that idle
'o
I The instinct of workmanship can
which the ends ofparentar bent
be thought of as ,,the means by curiosity is often viewed as "a genial infirmity of human .nature,'
are realized" [Diggins, 1977 il914, 85]. some people seem to have more idle curiosiry than oth-
D , rz4]. rn
other words, the instinct of
workmanship comprements ourparentar ers, and those with a lot of it are often considered dreamers or
even a
D bent because it supports the goar
of producing things needed to care little unbalanced [Ibid. 87]. Invesrigating something for no particu-
for the young. veblen saw the
t fwo instincts as so crosely related
it is "a matter of extreme difficulty that
Iar reason may seem like wasted energy, but the cumulative
many people'Just wanting to know" is
effect of
to draw a rine befween them,, profou'd. Mokyr writes that
g [1914, 25]' But trre instinct of workmansrrip
also comes inro pray i' "a lot results from curiosity, an essential human trait without which

t the pursuit of the goars

instinct of workmanship
dictated by our other instincts.
hr fact, trre
no historical theory of useful knowledge makes sense"
[2002, l6].
"may in some sense be said to over the long term it is one of the most important forces in civiliza-
t to all the rest"
be auxiliary
[bid. 31]. we get satisfaction from doing something tion. The simple curiosiry of the species led to what veblen called
t constructive. our other
insti'cts provide the objectives
that define
"the most substantial achievement of the race"
flbid. gz], namely
what constructive
means. the systematic advancement of knowledge. In othe¡ words,
, idle cu-

l ;
I
I

'rl
l,]
I
 T2 Ver-nrN N PL¿n'I ENcuss
htstincts IJ

riosity is the root source ofscience, and oftech'orogicar

change. We therefore come to rank people as better or worse, and we are (
Like other instincts, the extent to which idle curiosify
manifests aware that other people are ranking us. We become status-conscious
depends on a variefy of factors. For one (
thing, idre curiosity finds creatures. We make"invidious comparisons," wbich means that we
an outlet only if people can afford to be
idie. only after needs such compare people and rank one person better than another. Invidious I
as food, clothing, shelter and reproduction
have been met can one comparisons cause us to try to emulate those whom others praise, (
afford to spend time on something that has'o
immediate reward. It because we seek the status that comes from being ranked "better."
follows that the instinct of idle curiosiry will ,(
be exercised more in ln many cases emulation is helpful to the group. For example, the
economies with larger economic surplupes.,
instinct of workmanship caus.es people to appreciate hard work and '{
Idle curiosiry and the instincr
"r
#rHíffi, taken rogetrrer, efficiency. One can rank high in the esteem of the group if one can (
lead to improveme'ts in technology. Idle curiosiry reacrs to a better demonstrate a high degree of effrciency or craftsmanship. This may
u'derstanding of how the worrd works. The
ship exploits the new knowredge to trre extent
instinct of workman- cause people to emulate the best wor-kers and craftsmen so as to rank ,r
efficie't prodriction methods. The better methods
that it reads to more high in such invidious conrparisons. rl
..

are also welcomed Emulation also played an important role in "what may well be the
by our parent'l bent, as they make life easier
for everyone. As we greatest shock to Westem demographic history, namely the deciine ;l
shall see, technologicar crrange is the primary
in Veblen's evolutionary system. New tecrrnorogies
cataryst for mutations in infectious diseases in the industrialized West after 1870 or so." ;I
distur-b trre insti-
futional struchrre, and can cause institutions
to evolve.
fMokyr, 167]. Once scientists established the importance of cleanli-
ness and soap, they had to convince the rest of the population. The
I
I¡ between the group-regardi'g and the purely seif-regardi'g 6
in- first to be convinced were the high-status educated elite. Their high
stincts is a gray area inhabited by the
instinct of emuration. vebren
said that "the prope'sity for emulation -
for invidious comparison -
status made them objects of ernulation, so the rest of the population
was relatively quick to adopt tire higher standards of hygiene. The
I
is of ancient grorvtrr and is a pervading
hait of human nature,' ir g99, result was better irealth for everyone. I
109]' He goes so far as to say that,
"witrr tire exception of the i'stinct
for self-preservation, the propensity for
But our propensity to emulate is not limited to socially beneficial {
emuration is probabry the behaviors. We are also capable of emulating self-rggarding behav-
strongest and most arert and persistent
of tlie economic motives {
iors that do not advánce the interests of the group, or that actually
proper" llbid. 110]. peopte
have a natural tendency to copy, to make liarm it. For example, nany people throughout the world emulate €
comparisons and to rank the
performances of otrrers. Emurating oth- gangsters. tw
ers is how we lea'n. rn choosing In the United States, the gangster subculture is the sub-
whom to emulate, we nafurariy ject of popular music and movies. Suicide bombers emulate other
decide that cerlain peopre are
better at particurar things than otrrer-s. suicide bombers. Ernulation also plays a major role in consumption i'{
(
6
 a Ver-se].1 ¡¡{ pLeN ENcl¡sr¡

I decisions' many of.which

are for the purpose
Instincts l5

taining status. Fash.. of gaining or main-

3 habitual to the community the sentiment of seif_ag-

p emurare the fashi

on
do so because being: Tf _::
llJffi:?:,,ffi"ffi ,ffi : i:
grandizement gets the upper hand, and subservience
to the able-bodied elders becomes tlie dominant note
"in
fashion" uff.Jt, one,s
social ¡ank. But the in this relation of futeiage, and their parental inter_
D quest absorbs resources
that might be m ore
useful to the group est in the welfa¡e of tlie incoming generation in a
devoted to othe¡ thinss. if
3 corresponding degree goes into abeyance under the
The most obvious ,pressure of the appropriate sentiments of pugnacity
of the serf-regarding
D instincts is serf-preserva_
tion' It is a deep-seated and self-seeking, giving rise to a coercive regime
of
instincr, to a, animars. It is a more or less ruthless character
powerful of at"o**o,r
that it is trre nrost likery [1914, 45].
0 i'stincts, but as countress
heroism rarge and acts of t¡trce¿j,^
I does ¡iot arways
smail througtrr, iir,ory
override our parcntar
have demonstrated, it
r ne suDservlence of'the young to the old is common to many cul_
turcs, and would no doubt occur because of ou¡ parental
bent. w.e have a s.,ong bent alone.
D to preserve our desire
own lives, but not always After all, older peoplg have;mo;e knowledge and wisdom
at any
cost. than the
our procrivity for serf-aggrandizement yourlg. But when it ishÉf"zn?átffith self-aggrandizemenr,
$ adds fuer to oü tendency paternar-
to make invjdious
comparisons, as qrs , ism can become an excuse for serf-interested dominance.
n to rank high in our one need
cial group. so-
From an #;,:,:":::^::wlnr only to look at the repressive dictatorships arpund tt¡p world
to find
E
wan,,o be,rre, J::Hfi:'l_: TiTJHT:'JlJiffi examples wb ere self-aggrandizement Áá#..tr.'".?fjtffi
entalsolici-
some sifuations
serf-aggrandizement
T tude for the welfare of the masses.
D may make us wo¡k rrarder
demonstrate our to
prowess. But it can Another of the self-regarding rraits is our"fráaióf'iñstinct.
t"t. l.r, i*,rr, ;,u, *. rrre
t may even do harm
to others in order to predatory üistinct is tied closely to our desi¡e
improve
our own standing. to rank high compared
For exampre, self-aggrandizement
! can overwhelm parental to others, There is something in human nafure
that is gratified when
and can lead instincts
wrote,
to the oppression of
the young by the
old. As Veblen
we can dominate orher people. rt is ktrlhti.,r?fiáff€iih"
ftif
although in this case it is other peopre who are "hunted.,,
we want
to demonstrate our superiority over others to "prove"
or the tfi*frJij,. our higher
lT"THl-j -somerhing
or an status. Predatory actions may aiso ailow us to get "something
for
il il#;l H:'T,:11,
i 3'1,1: #f i úff :?*:r nothing."
Tire predatorv instinct is exhibited in a variety of ways.
s ub
".,,
e' t
s

and collective
i ;ii il,fl*fi
poo.f of
:::,i$ ü H,,* f :Tif
ror the mutual [T
- ' 4,<tsu-)-
cultures, Í{'arfaré is the most admired way
In some
of exercising predatory
^t;:'.r""'-l]'"'y
both parties to
**ooo exploit in any the reiation; if
predarory o. ¡arlike f drives. A victorious warrior demonstrates superior predatory
prg.wt
degree becomes ess, and often brings home trophies as proof
I of his exploits. Tro-
c:'''12't ¿*'1L u-^-
I
+' .¿,rt-+)r*1-r^,,-
\-.
-,... 'J-l¡.i.!l,' i-L)i¿--,1 ,i( kn '..u1i'¿-Llft
t.
Y .r-l .: ;.-i.,
-2i-.-,.i.. ;. _, _¡. :i..,,. .-, _- -i. .in* j

I
I
 16 VelnEx r^* Pr,cnr EwcusH
htslincts L1
/\.x?tlo-)
pnles may take the form
of objects, which can range f¡om usefur it is worth emphasizing tlrat the instincts interact with each other. I

goods to ceremoniar parapiiernaria-

Trophies may arso take the fonn For example, the creation of a better KW;i" may i'volve rhe in-
of captives who are erslaved and
forced to do trre bidding of the stincts of workmanship and idle curiosity, but the object of the im_
war¡ior. As wilr be discussed
in more detail in a rater chapter, the use provement might be predatory. on the other hand, the desire for a
of iow-status slaves to do useful
labor
associarion or productive
r;;;;ffitgmruil ilffi
trttl:?:iilllna¡r..rherefo¡e
better weapon couid also,arise frorn the instinct of parentlrood, as trre
weapon may help protect the group. The point is that lruman drives
lead some ro suppress rheir instinct are intenelated and easily blend into each other. No one instinct
of
*o.tlháfr'.f,#. ' e1)¡- is
always dorainant; human nature is complex.
n4nw"E""üyyY:glljs predation is illusrrared by whar
vebten calts
me pnesfly class." priests have
high stafus by virh:e of their crose
con¡ection to the diviniry. In addition,
priests can claim that offer_
ings are required to pracate the
divinity. Goods and status are ex-
tracted from others by the threat
of divine retribution.
rn a commercial curture such as
ours, business and law take the
place of warfare and religion
as outrets for predatory tendencies.
consider the actions of a business
that has a monopory.
maximize profit, the monoporist
!n order to
wi'restrict oupui uo4ft#pri"".
smaller output and higher price
run contrary to the generar irrterest
public atlarge. But the monopolist
does nor mind exploiting
::tT
rts advantage at the expense
of others.
legar profe¡sion is frequentry
in the news for its predatory
behavior' Popular jokes
equate rawyers with sharks.
vebren wrore
rhat "the lawyer is excrusivery
occupied with trre details of preda-
tory fi'aud' either i'achieving
or crreckmating chicane,,
Lawyers use the power uggg,23rl.
of their minds rather trran the
power of their
arms, but their behavío¡
is similar to that of wariors
seek to impose their
i' that they
wili on others for trreir own benefit.
The preda-
tory instinct is still a part
of human natu¡e.
 &
Institutions 19
&

F we think and act. Habits have such control over us that we

are of_
ten not even aware of ther¡. Much of what we do that ,,common
is
@
sense" is in fact done out of habit. It is worth quoting veblen
at
B length on this point:

I The apparatus of ways and means available for the

pursuit of whatever may be worth seeking is,
I sub_
stantially all, a matter. of tradition out of the past,
a
s
CHAPTER 2 . legacy of habits of thought accumulated through
the
experience of past generations. So that the marureri r

p
INsrrruTroNs and in a great degree tire measure, in which the
stinctive ends of life are worked out under any given
in-
B
cultural situation is somewhat closely conditioned
rtis almost a criché, but peopre really
are creahr¡es of habit. As a
F by these elements of irabit ... , Under the discipline
result, humans have deveroped habifual
ways ,lffiWrffi go;t of habituation this logic and apparatui of ways and
$ provided by tlreir instincts. rndividuals means falls into conventional lines, acquires tire con_
develop personar rr"uitr,
Groups deveiop social conventions, sistency ofcustom and prescription, and so takes
il wirich u* oo more trran group on
habits' over time, these rrabitual an in\titutional charabtel and force. The accustomed
ways become deeply ingrained.
D ways of doing and thinking not only become an
They acquire a life of their own in ha_
the sense that trrey become the bitual matter of course, easy and obvious, but they
I standard by which sorrect behavior
and thinking are judged. some come likewise to be sanctioned by social convention,
are formalized as laws or rures.
others rernain informar but retain a and so become right and proper and give rise to prin_
t powerful hold over people as customs,
traditions and reflexive hab- ciples of conduct. By use and wont they are incorpo_
! its of thought. An these habits,
taken together, comprise a complex rated into the scireme of common sense
[].914,6_7].
institutional stmcfure. The institutions
, a¡e i'terrelated and layered. Most habirs of thought and beiravio , ur"kur#frrom
They cover the entire range the past
of human thougrrt and activity. As ve- as traditions. we acquire them
I
blen put it, "institutions as we grow up and are taugrrt rrow
are habituar methods of ca'yiug on to behave and how to think.
the rife we become "sociaiized,' by leaming
process of the community"
llg99, 193]. A'nost everything we think what our family, community and'ation
and do is governed consider to be right and
t by habit. wr.ng. As children we are taught'religion,
tt almosr impossible , k*wÍre importance views on politics, how to
-- -t: of habit in üess, what to eat, how to behave in public,
the proper roles of
I veblen's vision' men
Habituar behavior is pervasive, and governs and women
how in society, views on race, the proper upkeep of a yard,
 20 Ver-erll n'l punr Exousu
Institutions

and a host of other things great

and smar. The views we are taught
established conventions. when was the rast time you thought
beconle our view of what is true, about
right and even natural.
cooking up some insects for dinner, even though many of them
we may acquire differe't views have
rarer in rife, but habits of thought,
whenever acquired, are difficurt high nutritional value?
to change. The primary reason
for Infomal habits of tliought are often more powerful than formal
the durabiliry of habits of tlrought
is trrat individuars generary do
not acquire thenr as the resurt Iaws. consider, for exampre, two common traffic raws. one
of a'y reasoning process. Tlrey are law i

not the resurt of a,y rationar carcuration. requires all motorists to stop at red lights while another requires
Ratrrer, alr ,.right trrinking,, (
people are led ro understand motorists to obey the speed limit. The first law is armost universaily
that the views held by our-famiry
community are true and rigirt.
and obeyed, a'd people wilr wait patiently for the right to change even
Most people in the u.s. wourd never {
even think about eating a
dog because we reflexively ,,know,,
whe'there are no other cars i' sight. The second law is frequentry
rhat violated, and most people don't feel the least bit guilry {
it is wro'g a'd inhumane. yet in otirer about doing
parts of the world, eating a
dog is acceprabre. Most peopre
so. The difference lies in motorists'habits of thought.
Speed limits (
in the u.S. do'ot think twice about
are commonly viewed as too restrictive and so are
eating a cow or a pig, but often ignored. (
in some parts of the world that
would be Habitual behavior no doubt evolved because it is a way for
an abomination. us to
The pressure to confonn to
deal with complexity. Every day we face a myriad
of decisions in- I
society's nonns is enormous. Vio-
cludi'g what to eat, what to wear, how fast to drive, how
lations of formar instirutio's
such as raws and rures carry formar
to commu_ I
nicate and what to think about world events.
sanctions such as fines, prison Habit and convention
a¡d job loss, violations of infon,al (
simplify our lives by giving us reflexive, automatic
institutions such as dressi'g answers to most
strangery or eating fhe wrong
food of these questions. If we had to reflect on each and
can result in sociai isoration every decision {
or worse. social sanctions force most
we would be paralyzed or insane in short
people to conform. As order. we rypicaily stop to
vebren put it, "onry individuars
with an aber- reflect only when confronted with something I
ranttemperanentcaninthelorrgrunretaintheirseIf-esteeminthe unfamiliar for which
there is no habitual or conventional á
face of the crisesteem response. t
of their ferows" Ilggg, 30]. consequentry,
ürstitutions are inherentry Habitual behavior embodied in institutions serves the important
conservative. Few {
the penalties associated o.oit. *u't'to ,iur, function of organizing society. consider what wourd
happen if ev-
witri acting contrary to wrrat everyone {
else ery individual liad a different view
"knows" to be proper. of the "right" way to do things.
we don't dare walk outside naked,
lrot surnrner r1ay, because even on a chaos and co'flict would result. social
order requires some degree {
the neighbors wi' think we
are crazy, attd of consensus. Instirutions allow us to agree
we might get an ested' on how we should orga- (
In fact, our habits of thougrrt
are so deepry in- nize activities at all levels, from tlie family
g.ai'ed fhat most people to the nation (or even the
calurot even conceive of
acting contraly to world), What would happen if there were no {
conventions regarding
{

(
 ¡ 22 Versuv ¡¡¡ Pr,nn¡ ENcLlsn Inslitutions
!
ianguage? How would we communicate?
Making e\¡eryone drive other ways. The severe restrictions placed on women until
$ on the same side of the road makes traffic recently
flow smoother and re_ in the west and in some other culfures today are exampres
of how
duces accidents. The habit of brushing
t one's teetrr every day reduces institutions can estabiish and preserve social hierarchies.
Keeping
the problem of tooth decay. setting standards
as to how electricify women iiliterate, for exampre, makes them easier to contror.
9 Habits
should be delivered ailows us to mass-produce of thought regarding race, nationarity and religio'rank people
erectric appriances. from
) The universal acceptance of intrinsicaily "better" to "worse." In medieval Europe it was believed
worthress pieces of paper that one,s
in payment for goods and services facilitates social status was divinery ordained, and that trre king ruled
I trade. Ail of these i'_ by divine
stitutions help individuars and society right. A modern example of an i'stitutio' that rramrs everyone is
sorve real problems. without
I institr¡tions, civilization could not exist. the belief that that the polio vaccine is a westem
device to make
\
, But to say that instit'tions organize sociefy Africans sterile. That belief is the primaiy reason why polio
does not imply that has not
society is organized in the ,.best,, possibie been eradicated, and causes many people to suffe¡
I way or that all institutions unnecessarily
serve a useful purpose.a Some instifutions [Economist,200aa]. n , ,.ll
t a'e more or less innocuous. A number
have no real purpose, and
In Vebren', *ind, one of rhe mosr
P#A:##/"of
of superstitions fail into trris thougrrt is
category such as the habit of avoiding nationalism. Nationalism stems fi'om the deeply held
l black cats. or consider the belief that arti-
pmctice of throwing rice at a weddirig. ficial politicai boundaries divide us from Them.
The rice symbolizes ferrility, Nationalism neces_
) sarily canies with
but most sveryone knows that throwing it an i'vidious rarüing of people, with those of
rice rras no effect wrratsoever
other nationalities considered less worthy
¡ on the couple's fertility. A¡other example or less hunan. politicians
is the expectation thar men
and oilrers éxploit natio'alism for their
in the united states must wear ties to own advantage. one result
any "formal,,occasion. The
tie serves no purpose other than
is war. As will be discussed later, businessmen take advantage of na-
to meet a traditionar requirement. in
tionalisln to further their interests at the expense
fact, wearing a tie may even be of the communiry,s.
harmful, as there is some evidence Veblen expressed his deep distaste for nationarism
that ties can restrict the flow as folrows:
of blood to the rread. But even trrougrr
au instifution sucrr as wearing Bom in iniquiry and conceived in sin, the spirit of na_
a tie does not sorve any rear probrem,
people take it very seriousry. tionalisrn has never ceased to bend human institutio's
If a man shows up at a formal event in
to the service of dissension and distress. In its r¡aterial
the "wrong" clothes, he will
be criticized for not having the proper effects it is altogether the most sinister as well as the
respect for the event, and then
ostracized
or told to leave. most imbecile of all those instifutional incumbrances
other institutions are more sinister that have come down out of the old order. The na-
in trrat they act to preserve
social hierarchies, encourage tional mob-mind of vanity, fear, hate, contempt, and
invidious behavior, or are harmful in
serviiity stiil continues to make loVal citizens a con-
 24
Veuex nv prn¡N E¡¡crrsn
htstihtlions
ventent tool in the hands of
the Adversary, whether-
these sentiments cluster about up appearances and property values. Mowing the grass ¡*
a sovereign or about the
the urroiot.jp"rron ot u""o.ffi
magic name of the Republic. armost purery ceremoniar. peopre do it because
trrey are expected
Within a fraction of one plr cent.,.the to' Yet the habit has practicar roots. Tail grass
divine Light is a favorec hubirut or
of the Nation has the ,uÁ, ,r"r,
shape, color, and vemin such as ticks-
Keeping the grass short reduces the crrances
density as.the divine right the of
Stuart kings once had, getting tick-borne diseases. But this practicai
or as the divine right of Bourbons, purpose has been lost
Huprburgrm una
Hohenzollem have continued in the status-seeking competition to riave the greenest,
to have at a later date. most weed-
a¡d it has also the same significance free, best-trimmed lawn o'the brock.
for .,life, liberty Actions fust taken to protect
and the pursuit of happiness,, health have turned into the Cult of the
LIIZ3,3B_9J. Lawn.
Unfortunately, the scourge lnstitutions persist because of the power
of nationalism is still with of habit and tradition.
us. We accept them because they seem ,,norrnal,,
Many' if not most, instifutions
acfually combine useful and or even ,,good,, [o us.
so useful functions' For not They are inherited from the past ancr
example, people wear clothes are internarized as right and
protect themserves from
in order to true' And the older the hadition,
trre erements. Trrat function the more normal it seems. It is
courd be ac_ easy to look at new ideas or at alien curtures and
complished with very see their flaws,
simple and inexpensive gannents.
But peopre but it is difficult to do so with "time-honored',
often choose to wear expensive traditio's in our own
clothes that are ,,in fashion,,,and
are culfure. we are taugrrt from infa'cy
willing to buy'ew clothes every to view our traditions as normal
tíme fasrrions change. peopre
do and nafural, so v/e rarery, if
rhey.feel rirar rhey must in eve¡ subject them to rationar trrought.
order to maintain rheir social
:_.^::Tr.
)Ldr us' t-¡r conslder tire previously If we do think aboui them a'd decide
that trrey are wrong, it is stiil
mentioned rrabit of brushing
teeth regularry. Trre one,s very hard to change them
habit rras trre usefur function because of the penarties associated with {
of reducing tootrr violating accepted laws, rures
deca¡ but peopre arso or custonrs. working against accepted
do it to meet the sociai custom I
that requires conventions often requires
white teeth and .,fresh,, an extraordinary amount of courage, and
breath.
success is rare.
Habits may begin as ways
to soive probrems, but as trrey
,{
into instifutions, they soridify It is important to emphasize
take on a life of trreir own. peopre trre tenacify of instizutions. consider q
are expected the following story about
to observe tlie institution a habit that persisted rong after it no longer
not for its usefurness, but
becauie ,.right-
j
thinking" individuals ,,hgyl,/i.ut se¡ved any useful purposel t
it is the right thing to do. If you
ask most people why
thei, W#ff"srass in
their yar.ds, iliey will tell At the outset of VTorld War II, Britain was still
you that one is just scrounging for any \,veapons it could get its
supposed to. If pressed, hands on, (
they may say that ihe
grass looks nicer and so de-mothballed a piece of Iight field
moi'vn, or trrat they rrave artillery
to mow it in o¡der to keep
from the Boer War. The five-ma.n crew it rounded up aT

€
 26 Vsr-sp¡¡ lr.r Pr-¡,n'¡ ENcr-¡sH ]¡tstitulions 27
t

I , had a curious system for firing the armament: Pre- from generation to generation. In a general sense, it is goOd that
cisely three seconds prior to discharging the gun, two institutions resist change. if they were completely flexible, sOciety
l
of the men would snap to attention until all was'silent
would descend into chaos and might not survive. But like genes,
i again. None of the experts or young offrcers consult-
institutions are subject to mutation. They can change. The changes i
ed could deduce the point of the exercise. Finally,
' they brought in a wizened retired arrillery colonel. are typically small, but the effect of many small changes over time

¡' He watched the exercise for a moment, then, janed can be quite large.
by an old rnernory, recognition flickered in his eyes: Even in "revolutions," most instirutions stay the same. Habits of
¡ "I have it. They are holding the hoises." You see, in
thought do not change ovemight just because there is a new type
the past those two men would have physically held
9 the horses to prevent them from running off with the of governmerrt. When revolutionaly govemments try to change too
sound of the cannon fGoldberg,2005, 6]. much too fast, most people resist. If the new rulers iirsist on change,
t it can only be accomplished by force. Tens of millions died when
The "right" way to fire the gun persisted long after the horses were
b Soviet and Chinese Communist zealots insisted on dramatic, rapid,
no longer used.
revolutionary change.
D Lf habits of thought with no purpose can persist for so long, imag-
veblen's primary objective was to explain how and why institu-
ine the resistance to change of an institution that benefits one group
D tions evolve. ln contrast to the neoclassical obsession with static equi-
at the expense of another. "Vested interests" do not easily give away
s libria, Veblen wanted to explain the process of change. His goal was
their advantages. To take just one example, men benefited from the
to ereate a theory of evolutionary econornics aiong Darwinian lines'
s subjugation of women, so tl'ley had no incentive to change. Women it
The rnost óbuiour fearure of a modern economy is the fact that is
were mrely in a position to insist on change, even if tirey thought
$ never in equilibrium and is constantly changing' Moreover' the rate
about it. After all, they were raised to view their role in society as
of change seems to be accelerating. veblen wanted to know why.
D perfectly normal. Women in the United States were not given the

t right to vote until 1920. Even today, habits of thought abour the
"proper" role of women in society are not unifomrly "nfodem." ,

w
In Veblen's evolutionary scheme, institutions are the equivalent
D of genetic material. They are the mealrs by which a society repli-

F
cates itself fi'om generation to generation. If genes were radically
different from one generation to the next, it is likely that the species
& would not be able to survive. Stable genes make fo¡ a stable species.
Likewise, the stability of institutions means that societies are stable
h
s
h
 Panr II
TBcHxoLocY
-ra
At[D
a-t
SOCIAL ,bVOLUTION

P¿-{-o
So what causes instirutions to change, and why has the [ace of
change increased in the past few cenhrries? The short answer is that
technological change is the primary cause of institutional change,
and the faster the rate oftechnological change, the faster the pace of
institutional change. Technological change can create new possibili-
ties and new problems that put pressure on institutions to change'
At a more fundamental level, the process of technOlogical change
can affect how we think. That, in tunt, can affect lrow we view our
instirutions. But before looking at these ideas in more detail, it is
worthwl'rile to consider the nature of technology.
3 Technology JI

a
life-history of the race, it appears to be true for the
3 most primitive human groups that the mass of techno_
p ,
logical knowledge possessed by any community, and
necessary for its maintenance and to the maintenance
3 of each of its members or subgr.oups, is too large a
burden for any one individual or any single line of
3 descent to carry. This holds true, all the more rigor-
ously and consistentl¡ the more advanced the .,state
3 CHAPTER of tlie industrial arts" may be [1919, 325_6].
3
s veblen read extensively in the area of antruopology and knew
I TBcHNoLocy that the amount of knowledge.possessed by "primitive', communi-

3 Contrary to neoclassical parables about Robinson crusoe-econo-

ties was far greater than what most "modern" people suspect.
But
even if that weren't true, nobody can dispute the fact that
the amounr
3 mies, humans live in groups. veblen wrote that "in the economic of knowledge possessed by modem societies far exceeds the
capac-
3 respect man has never lived an isolated, self-sufñcient Iife as an ity of any individual or family.
W.ú
individual, either actually or potentiaily. Hurnanly speaking, such To illustrate how even a "simpie"'Éit of modern technology
3 a thing is impossible" [1919, 324]. Even rhe famously independenr requires far more knowledge than a'y one person has, consider
s "mountain men" of earlyAmerican history would rendezvous once a an ordinary number two pencil.' To make a pencil
one must have
year to barter for goods they needed but could not make themselves. knowledge of how to find and transport the necessary
$s materials:
The amount of knowledge needed to provide even a "primitive', graphite and clay to make the "leaá," metal ores to
make the eraser
@ standard of living is too extensive for a single individual to possess. holder, rubber for the eraser, pigments and chemicals
for the paint
Technolog¡ even in primitive groups, is possessed and transmitted
0 and wood fo¡ the body of tlie pencil. Then one must
know how to
by the group as a whole. As Veblen put it, properly use the materiais to produce the desired ¡esults.
s Information and proficiency in the ways and means of one would also have to know how to make ihe tools
of course,
needed to do all
I life vests in the group at large; and apart from accre_ of these things, and how to make the toors needed to
make the tools.
tions borrowed from other groups, it is the product of
o tire given group, though not produced by any single
No one individual or family k'ows how to do all of these things.
And a pencil is considered ,,low-tech.',
I generation ... and it can also be maintained
tained only by the comnrunity at iarge. Whatever
and re_
The point is that individuals know onry a tiny fraction of all that
may
I be true for the unsearchable prehistoric phases
of the
./
a sociely knows. The more sophisticated
the technology, the smaller
s
B
 VELseN ru Plan E¡¡cllsn
Technology

tiie fi'action any ore individuar can larow.

r' addition, an i'dividua|s A society's technology is, from an economic
knowledge is gerieraily of varue only in
the context of society. our
l,#th*,,q
valuable possession. Technology, or what
individual speciarized bits of knowredge
are varuabre only because
V.bl";;r;; I:::
"imnraterial equipment,"
others know things that compieme't what [1915, 2721is far more valuable ,n"" ,í.1
we know. Take a few of the terial equipment. In a passage about the
most advanced scientists and engineers california Indians, Vebren
on fhe planet and put them in wrote that
the midst of a sto'e-age trÍbe. without
an anny of modern workers
and technicians to herp trrem, their advanc.ed the Ioss of the basket, digging stick, and
knowredge would be mortar, sim_
physical objects, would have signified litrle,
largely useless. In fact, unress trrey were
given appropriate tr4ini.ng, llY 1
but,the concdivable loss of the squuwt knowledge
the scienrisrs and engineers wourd probabry.!.e
a liapiliilo,nr1}#-1-, of the soil and the seasons, of food and ñber plants,
The facr rhar modem regar insriturion, íiÍáíffi;r¿u.r, and of mechanical expedients would have
to par- meant the
ent pieces of k'owredge does not change present dispersal and starvation of the
the communar narure of community
tech'ology' A particular prrarmaceutical company, lrbid. l8s].
for exampre, may
be the only one tilat knows how to
make a particurar drug. But with- witt' the right knowledge, Iost rnateriar eqüipment
out the knowiedge possessed by the people :- -_ can be repraced.
who make and transport ' Without knowledge, we are incapable
of producing anything. More_
the requisite ingredients and equipment,
and without trre k'owredge
i' oVer, without the knowredge
of how to use them, trre most advanced
of the people who nrake the tools needed
to make the ingredie'ts, I machines and equipment are
useless.
equipment, and transportation, the patent
would be useless. It follows rhat if a society can
maintain its cohesion and trrerefore
A corollary ro the idea that technology is a group possession
technology, it can withsrand much devasration.
is the fact that breaking up trre group can ,il;=r' :^t:]ts A war mig h,t?jl:t -tu
diminisrr or destr-oy its .esf'oy sa r¡qrrurr
nation'sü r¿ruLurles
factories ano
' and lnfastrucfure,
i'frastrucfure, but as long as the
fechnolog5r fVeblen, Ig14, ll O]..As.already i1,i
l;i;i,, ^,^.--., solt; r,rra,,.!=,
the l,oro=,,',.,r', . ,, .
uii
mentipned, knowledge is intact, it can recover- irs rechnorogy
wil ailow it to reprace "'
held by isr¡lated i'áividuars is of Iittre
uuru".l rt foilows rhar a ross ,iii, -iltl
equipmenr. Knowledge is far more imporranr
of group cohesio. can be detrime¡rtar
to its tecrrnorogy. The Aztec 'fi ::.'t:t_material
r'--* material possessions.
rhan
calendar was asronistringrytffiLiP., -..rÍ' r'
¡r, tecrrnorogy needed to
produce it disappeared soon after 're
the Spanish conquest. The social
iii,,^^ '"tunt have commented on the abiliry of countries to recover
.ii.::..-
.jir.:ji..:. wars or from narural u¡o4rrul¡.
disasrers. The rapid fg_
fragmentation that accompanied
tire disintegration of the Roman lri...llil ]'.rydestructive
coveties of Japan
rrlc IapI0 re_
i,iti, and German from the utter devastation
Empire insured tliat much usefur .. of world
hrowredge would be rost, and it :'
ll have been described as miraculous.
took a long time for Europe to recover. fi+... Ilt Japan,s per capita GDp,

will have a similar effect.

Any major sociai dislocation
¡",i*. i:::-:tple,' ñ;r;ffi;";
was less than zo p.r..o, oi
"'u, Dut was over 80 percenr of U.S. per capita GDp by l99l
ifi [Cox
 34 Vrl¡r'N rN PLArN ENcr.rsit
€
s and Koo, 2006, 1]. Germany's speedy recovery spawned the term
B Wirtschaftswunder fEconomist, 7006,3]. But the recoveries only
appeared miraculous because of an inability to see tirat knowledge of
B
the industrial arts matters far more than material equipment. There
s is a bias in the way economists and others see the world. Material
ffi equipment is tangible and can be valued. People can see the effect of
a war or an earthquake on factories and houses, and a dollar estimate
€
of tire destruction can be made. On the other hand, tecbnolog¡ the
s "immaterial equipment," cannot be seen and cannot be measured. If a
s war destroys every physical strucfure, the nation will appear to irave
lost everything. But unless the human casualties are exbao¡dinarily
s high, it will retain its most valuable possession, its knowledge.
s Irnmaterial equipment is, far and away, the more im-
s portant productive agency in the case; although, it is
true, economists have not been in the habit of making
É much of it, since it is in the main not capable of being
s stated in terms of price, and so does not appear in the
statistical schedules of accumulated wealth fVeblen,
s tgI5,272).
É If something cannot be measured in dollars, it tends to be ignored
p by ecooomists and accountants. But it is a mistake to conclude that it
isn't valuable. As the old saying puts it, "not everything thaf counts
@ can be counted."
€ It is fashionable to describe the modern economy as the "knowl-
edge economy." The truth is that alf economies are knowledge
@ economies. Knowledge is at the ffi everything we have and
s do. we may measure the wealth of nations by tire dolrar vorume of
goods and services produced, or by stocks of tangible assets, but
s deeper into our narrow area of expertise. As the old joke has
p'
:i,€
Technology 35
tlieir real wealth is their technology. The point is often overlooked in
part because technology camot be conveniently measured. n/
Tlre criticalimportance of technology **un, that it is g#lrfhff: '^'
to examine tire process of technological change. As previously men-
tioned, the instinct of idle curiosity is responsible for the discovery
of much new knowledge, The fact that sorne individuals tend to
have an unusuaily large amount of idle curiosity (and idle time) may
seem to imply that technological change is an individual phenom-
enon. But that is an illusion. Individuals live in groups, and draw
their existing knowledge from the group's pool of klowledge. In
addition, the individual's habits of thought are conditioned by group
life. As Veblen wrote,
Each successive advance, every n.*fir,Tffi-.of nov-
elty, improvement, invention, adaptation, every fur-
ther detail of workmanlike innovation, is of course
made by individuals and comes out of individual
'
experience and initiative, since the generations of
mankind live only in individuals. But each move so
made is necessarily made by individuals immersed
in the community and exposed to the discipline of
group life as it runs in the communiry, since all life is
necessarily group life I l9 14, 103-4].
Robinson Crusoe could not have invented$le microchip.
An individual can know only of the total stock of
"4fryfátíí-*
knowledge. That means that larowledge is specialized. One person
may know things that another person doesn't, and vice versa. As
knowiedge becomes more speci alized, each of us becomes more
dependent on the group. But we also irave the opportunity to delve
it, rve
 36 VetneN n¡ pr¿m ENcuss
Technology

Know more and more about ress

and ress. The increased specializa_
tion is conducive to expanding industrial insight and proficiency
our understandi'g of the topic can apparenily be
at worked out only trrrougrr such crose
hand' we can focus our attention and sustained
and so gain a greater understand_ attention to a given line ofwork as can
be given only
ing of our specialized area. within the lines of a specialised occupation.
At the 'ri:íii

ln book one, chapter trrree of The same time the industrial community
must comprise
ü
weartl,t of Nations,Adam Smith
a full compiement of such specialised
I
i
rr776l explained trrat the degree of specialization occupations,
in production is and must also be bound together in
limited by trie extent of the market. a system of com_

productivifi but if the increased

specialization increases worker munication sufficiently close and faciie
to allow the I
ousut cannot be sord, trrere is no teclnological contents of all these occupations
to be
poi't i' speciarizing. onry a large readily assimilated inro a systematic whtte I
mar-ket will ailow for extensive ... . If the :

specialization. Veblen made

an analogous argument with
respect to
degree of isolation is pronounced,
so that traffic and
communication do not run freely befween
I
the specialization of knowredge. groups,
"^*ot b..o-- "##?G.:
one the size of the local group will limit the
cialist in a small communiry.
If you are the only doctor, you canxot industrial arts somewhat rigidly
state of the I
Llgll,1 07_gl.
specialize in heart disease; you
have to treat everytrring. specializa-
Veblen emphasized that "community"
I ¡

tio'becomes possible onry wrie'tire

commu'ity is rarge enough to
in this case refers to
noiogical commu'ity, not to a poriticar
a tech- I
support many docto¡s. As community. He noted that a
a result, it is unlikely that a i
doctor in a small country witrr a small popuration
small communify can make can be part of a rarge tech- T
a deep study of heart disease
and make nological communify if it engages
I
I

advances in how to treat in open-afirfree communication

it.
with other countries I

The point is that the size of [ibid. 109n]. To thJdextent trrat a country is iso- I

the tecrrnorogical community lated, it will experience a decline €

has a in its rate of technologicar change.
profound impact on the rate
of technological crrange. A smarr, writing just príor to trre outbreak of'v/orrd
i
iso- war I, vebren predicted €
lated communiry is not
likely to adva'ce very quickry. It that technological advancement¡o_uld.be
is worth retarded by ,,the efforts of
I
i
quoting Veblen at length
on this point: :
th o s e p a rri o r i c an d
dyna s ti c fta t€#*'iíh6 ur" &5>#íéiü'íÉi"
r.,
This necessary specialisation
and detail training has
thesepeopi"gsí#'írunu'*.agrkii¿-.##t}'ril.lon"iur." I
large consequences for the in times of peace, political
gr-owth of technology as
well as for its custody andJransmission.
It follows communication and thereby
boundaries tend to impede the flow of
slow the rate of technorogicar crrange.
I
a
ihat large and widery diversifieJindustriar scheme Nati o n¿ I i s m i rng*.¡-Í.1?c {
is impossible except in a c on o m i c d e vel op m ent o f
-'{F-'"':¡4.^.4. hum ani ry.
community of some size y- --. .
- Iarge enough to supporl also /shane
I
rnsnncK ape technological
tect
u orrrrrb., and variety of change. Idle curiosity mav
special occupations. In generate new ideas,
but how those ideas are used depends on the
effect, substantial gains in
Eoals established by the other instincts. where
¡varrike predatory
 38 Vr,LsEN n Pu,nt ENcusH Technol.ogt 39
3
ort
{ tendencies dominate, new ideas are likely to be considered in liglit Tire long run demographic effects could be profound.

3 of their abiliry to help UuitO new4Ba.fr6*. ryfr"re^pa;enral instincts Habits or tnougrf,lú:",{ii#írt or rechnotogy by defining which
dom i nate, rnore nurturing app licati ons wil I bf#fgKK3mi c ttreory tecturologies are "good" and which are "bad". In the insti¡¡tion
3 gave us both nuclear weapons and medical treatments. r . known as business, good and bad are defined as profit and loss.
3 Instincts will guide technological cha¡rge n tff eW{t'úar "rhe New technoiogies that increase profits are welcomed while those
grówth of institutiorl llgs,ngÍ r..iou.rffiÉl-Éá'1i# g"niu, of the that do not are shun¡ed. Reiigion also helps define "good" and "bad
3
race from its nat ra(#íffiblen, Ibid..1I01. Instirutionsffil^ tecirnology. Amish people do not use electricity. Islamic terrorists
s both how new ideas are used and the direction of technological decry Westem decadence but use modem communication technol-
change. Existing habits of thouglrt use new technology to support ogy to transmit videos of them beheading people in the name of
$
existing institutions. lt is no coincidence that the first book Johann tireir predatory feudal cause. The same p.epple plohibit y¿omen from
s Gutenberg published witli his moveable type was a Bibie. The most driving. The use of technology is often {ffiV#'iítfffné"it turthers
-B powerful formal institution in the West at that time was the Christian tlre objectives of institutions. _ t-
;ñ
g
religion, and the new technology was put to work in its service. lnstitutions also affecf which technologies will b. PdHff't'/''o'>
Other uses of the printing press were restricted, especially those that Mo de rn iine s o f 'líf;ifit'í;{i'¡í;ir' thin gs as .
generi c en g ineerin g,
3 rnight challenge religious or poiitical authority.. Even^today, rhe free- cloning and stem cell research have U""n(iffi¡fÉt'fiñ,fti"al and

É dom to use printing technology ts s.ru.r.ty é#ffé¿á ft?-uny parts of religious habits of thought. Business habits oltho,ught control the

tr tlre world because ¡ ¡, {##ft'#uUtirh.a habits of thought aird modern economy and so trave a large.or" in$r$trfft$ffimt
p
institutions. Tire power of what Veblen called "vested interests" to , cai devefopment. Technologies that promise to increase profits are
é¿-¡;{'}-#+*r,
s limit or control new technology is enonnous. -soúght; those that are unprofitable but might be "good" according

I Institutions somerimes 8á'd$ái€ñle ro make use of new rechnol-

ogy in surprising and disturbing ways. Modem technology allows
to non-business instihrtions are not pursued. We encourage things
we consider "good" and discourage things we consider "bad," but
s one to determine the sex of an unborn child. In China, that ability, good and bad are defined by the instirutional structure.

s coupled with laws prohibiting couples from having more than one At an even more basic levei, institutions affect teclurological
child, has led to rnany selective abortions of female fetuses. That is change because systems of knowledge are themselves habits of
É because traditionall¡ males are preferred to females. The result is a thought. Veblen described the "state of the industrial arts" as "a
s growing imbalance between the number of rnales and females in the system of habits of tirought" fVeblen, 19L5,272]. What we "know"
country. china's 2000 census reported il8 boys bom for every r00
s girls, compared to a normal ratio of 105 to I.00
to be true about the world is conditioned by habitual thinking. We
examine new ideas and observations in the context of our habitual
fEconomist, 2004b].
s
E
#
 '40 Vnrsr¡.r rN Punv ENcusu
Technology

method of thinking. Ptolemy's theory

that the earth was ,re center cataiyst folinstit'tional change. It is the source of mutatio's
of the universe survived for I400 years. in the
New díscove¡ies about trre genetic material that makes up a society.
movemenr of the sta¡s and pranets were As Veblen wrote.
made t¿+dfh![ Étoremy,s
system because people habirua'y There are two lines of agency visibly at work
rooked at the universe from a geo- shaping
the habits of thought of the people ... . These
centric point of view. The fo¡ce are the
of habit was so great that it was received scheme of use and wont, and the new
almost impossible state
!g tlrink in any,other terms. of the industrial arts; and it is not difficult to see that
Every *o¿"*'á éÍá"ír *ht'r;d iiáÍ ;;' it is the latter that makes for readjustment; nor should
the worrd' Every "school of thought"
r-,
"¡i
*ai way of rooking ar
it be any more difficult to see that the readiustment
I
is just a set of conve'tigns
through which new ideas are fiitered.
specialists in every fierd are
is necessarily made under the surveillan.. óf úe
re_ I
ceived scheme of use and wont i
taught a particurar approach, and [1915, Z2].
most are incapable of thínking G

:*: j:il $tH.#{1t,ffi: ffi il jlilffi ;,i]"il:

Tlre "new state of the i'dusrriar arts' (new-rechnorogy)
{¡¡ft*l-' t
I
can
"rhe received scheme of use un¿(ffifitú'(ihÉ"in¡iitutii'".r
rr*.*r.1. :

who violares an institurion. .,Hererics,,are

raretyffi;j f;í,in"#"V_ The changes initiated by new technology ard,
however, guided by
{
aúymore in the'v/est, but one's
v'/
ar risk by unorthodox views.
emproyment and reputation are put the existing institutions.
I I

rn conrrast, rt.r"
ur"ddfliitrn¡d;*r,,
g g,.$l:
#pams:.
boa t. A s Veb I eu # í"i#réií'ar
erve d,,,,h *-%i{ i*l?t'
s
!
are easy to follow and lead into good (
company,, UgIg,7gl.
Even if
there were no penarties for hording
f
I

unorthodox views,
such views are themselves just
anotirer set of conventions. Those I
who manage to escape the orthodoxy {
soon develop their own ha_
bitual ways of looking at the world. ¡

The onry différence befwee'an 6

orrirodox and an unorrhodox approach,"
"%Éi'á
# Kffi4ra dis_
agreement about which habituar 6
mode of thinki.g is correct. In both
cases the inquiry is constrained
by an habih-rar world-view. There is '-{
no escaping the fact that people
are creatuLes ofhabit.
affectthe speed and direcrion
{
oftechnological change.
- lrrt|urt:ns
uut technologicar change, in
turn, affects trre speed and crírection {
of institutionar change' rn fact,
tecrrnorogical change is trre primary I
I

q
I
q
I
+ Tec ltno lo gical Change and hu titutional Change 43

a change brings with it social change. For example, trre technologies

I that ied to the factory system altered how and where we worked. As

B Mokyr wrote,

p Much of the history of technological revolutions in

the past two centuries is written as if the only things
3 that tecirnology affected were output, productivity,

s I

CHAPTER 4
and economic welfare as approximated by income.
... Yet technological progress also affected other as-
s pects of the economy that may be significant. Among
those is the optimal scale of the basic economic
s TBcuNol,ocrcAl, production unit and the location where production

s CHexcE AND takes place. These in tum determine whether,,work',

will be carried out in a specialized location and thus
3 INsrrrurroNar CuANGE whetirer households and firms will be separate enti-
ties [2002, 119-20].
s 'Wh"tr
a new technology emerges, existing institutions do not pre- As production tecirnoiogy advqnced, the amount of knowledge
s scribe how individuals or the sociefy should employ it. Because it is one needed to use ir came ,tyi##Sinat a single person or family

s new, there are no habits ol conventions goveming its use. it is oniy .our/frffitV'#'T a specialized line of work. There was ,.infor-
after the fact that institutions arise to govem the use of the new tech- eh/a[']ifif okyr,2202,13g1. As veblen wrote, ,,machine
s nology. For example, the automobile existed before there were any
mation
industry calls for a large-scale orgariisation" [1914, 351]. The inde-
s laws or conventions goveming how it would be used. But as automo- pendent producer cpuld not compete with production organized in
biles became popular, it became obvious that predictable patterns of ff;ff fíflcrory production
$ use were needed to avoid accidents and to improve traffic flow.
a factory. Th" demotished ancient habits.
For one thing, most people no longer worked at home. Family life
Traffic
# laws were created..Now, one can legally d'ive only after reaching a changed dramatically as one or more adults spent most of the day
s certain age and demonstrating knowledge of the laws. In other words,
automobile technology generated new institutions, and.
away fi'om home. Time and energy were spent travelling to and from

I of the tecluology came to be govemed by the new

as a result, use

instihitions.
work. Workers were no longer their own bosses, and so could not
choose how many irours to work each day. And wo¡kers who had
s New teclrnologies often do more than just generate
new insti- always worked in their own iromes and at thei¡ own pace,,had to be
tr:tions; they also alter or destroy old institutions.
9 Technorogicar taught to follow orders, to respect tire space and property rights of
p
s