Thorstein Veblen

Thorstein Veblen was an economist and sociologist who is best known for coining
the term "conspicuous consumption" in his 1899 book The Theory of the Leisure
Class.
Veblen was interested in the relationship between the economy, society, and
culture. He analyzed the social order and believed that people made purchases to
signal their economic status and accomplishments to others.
Veblen critiqued the consumption habits of the wealthy and questioned their
values. He coined the terms “conspicuous waste” and “pecuniary emulation”
(striving to meet or exceed someone else’s financial status). He also founded the
school of institutional economics. Veblen lived from 1857 to 1929.
● Thorstein Veblen was an economist noted for his contributions to the development of
American institutionalist economics.
● Veblen is best known for developing the concept of conspicuous consumption, or
excessive consumption for the sake of signaling social status.
● Veblen’s theories created the concept of a Veblen good, which refers to a product
whose demand increases as its price increases because consumers consider it an
exclusive status symbol.
● Veblen believed that limits on production by businesses to raise profits contributed to
problems such as unemployment.
● Veblen's theories became a major foundation of 20th-century critiques of
consumerism and for-profit capitalism.
Veblen Good

Because of Veblen’s analysis, we have the concept of a Veblen good,

a product whose demand increases as its price increases because
consumers consider it an exclusive status symbol—in other words, a
product that is consumed conspicuously.
Veblen goods are designer, luxury items with a strong brand identity.
They are not sold in regular stores and are highly coveted. Consumers
perceive them as being more valuable because of their higher prices.3
Examples of Veblen goods are Rolex watches or the latest model of
the iPhone.
These goods are priced so high that only the very affluent can afford
them. The higher the prices of the goods, the less likely it is that other
consumers can afford them, and buyers begin to perceive them as a way
to signal great wealth and success. If a Veblen good's price decreases,
demand will decrease because status-conscious consumers will see it as
less exclusive.
Conspicuous Consumption

Veblen considered this conspicuous consumption to be inherently

wasteful because of the large real cost of producing Veblen goods. If
lower-cost means of signaling social status could be employed, then
the resources consumed by the production of Veblen goods could
instead be used to produce more urgently needed goods and services.
Along with conspicuous consumption, Veblen criticized charitable
activities of the rich and conspicuous leisure (non-work time devoted to
consumption activities), from which his book draws its title. Veblen's
theory is an important part of the critique of consumerism.