Conspicuous Consumption Theory

John Kenneth Galbraith and Thorstein Veblen both sought to formulate their conception of the role of power in an economic society. In his writing Power and the Useful Economist, Galbraith presents the idea that the state plays a significant role in deciding how the economy spends its productive capacity. In Veblen’s writing The Theory of the Leisure Class, he presents critical thinking and theories that pertain to the habits of individuals in society and their related social norms. Both economists present their ideas from the view of institutional economics. This perspective emphasizes the salience of the role that institutions play in shaping the social values and norms that constrain human economic behaviour. The notions of institutional …show more content…
Veblen introduced the major method to this end, known as: conspicuous consumption. Conspicuous consumption is the purchase of any item that does not have a productive function or has a price that is well above its practical utility, therefore it is a good that is valued solely for the social capital it brings. Conspicuous consumption in the items one purchases is the most efficient means of displaying their predatory abilities. Because emulation is such a powerful motive, these wealth-displaying activities quickly spread throughout society. Conspicuous consumption expresses pecuniary emulation even more so than leisure, because the working class purchase wasteful items in an attempt to appear as wealthy as the upper-class, even if their employment and income does not measure up to that of the leisure class. Therefore, the working-class uses conspicuous consumption in order to feel as though they are wealthy, because “income inequality, in general, causes unhappiness, imposing psychological costs on families at the bottom and in the middle of the income scale, and thus, they spend more on conspicuous consumption to reduce their dissatisfaction” (Hwang & Lee 873). Heilbroner argues that this conspicuous consumption exists because leisure is “enjoyed more fully by being dangled before the eyes of the public” (229). Therefore, the leisure class …show more content…
An understanding of their power is crucial before understanding the mechanism of the firm. The firm is comprised of the leisure class individuals who use their power to control the market. The greater the economic power of these firms, the greater their ability to influence market prices, increase profits, and control wages. Veblen and Galbraith argue that the role of the businessmen, or otherwise known as the capitalists, is to use their power in order to maximize their own profits. In order to do this, they force scarcity of goods and services, which in turn will lead to unemployment and decreased wages due to the lack of work available. Marc-Andre Gagnon further explains this theory, arguing that “the ownership and control of the material contrivances to put to use the community’s immaterial equipment becomes a strategy for control over the community” (595). Therefore, “the accumulation of capital is not the accumulation of means of production, but, rather, an accumulation of control over the industry of the community” (Gagnon 596). The enemy of the businessman is the machines, as they allow for an increased amount of technology, and thus a downfall of the economy. This will lead to a rise in the power of what Galbraith labels the “technostructure”, which is the group of technicians or engineers within an enterprise. These individuals will