A recent article in the New York Times by Robert H. Frank, “Conspicuous Consumption? Yes, but It’s Not Crazy” epitomizes the paucity of understanding of Thorstein Veblen‘s economic theories today.
Frank approaches the topic of “conspicuous consumption”, a term coined by Veblen, from the standpoint of neoclassical, marginalist economics. At this point, Veblen would be rolling in his grave. Frank talks about “Veblen goods” which he describes as “commodities whose sales actually increase when their prices rise.” This is not a term or concept that Veblen advanced (indeed, Frank is actually describing a Giffen good, also called a Gray good). Frank accurately states, “The term was inspired by the economist Thorstein Veblen, who interpreted much consumption by the rich as an attempt to signal their great wealth to others.” (emphasis added). Yet where the article goes really wrong is in the very next paragraph, beginning, “Yet wealth-signaling is probably less important than Veblen thought.” Its argument is logically flawed in jumping from a theory advanced by others to draw conclusions about Veblen’s own theories. The basic thrust of Veblen’s life’s work was to critique the pro-finance (non-)ethics of neoclassical economics. One of the most frequently quoted passages from Veblen’s writings (“Why Is Economics Not an Evolutionary Science?”) attacks the marginalist equilibrium theories of neoclassical economics:
“The hedonistic conception of man is that of a lightning calculator of pleasures and pains who oscillates like a homogeneous globule of desire of happiness under the impulse of stimuli that shift him about the area, but leave him intact. He has neither antecedent nor consequent. He is an isolated definitive human datum, in stable equilibrium except for the buffets of the impinging forces that displace him in one direction or another.”
Frank’s article basically tries to chisel away a sliver of a concept about “conspicuous consumption” (a form of “conspicuous waste” in Veblen’s terminology) and applies it in the service of marginal utility theory. This is completely contrary to Veblen’s original theories. So it is difficult not to scoff at Frank’s conclusion that Veblen may have been wrong, when Frank starts from a premise so unsympathetic and downright contrary to Veblen’s original theories. Actually, this is not the first (and probably won’t be the last) time the New York Times has run an article like this that blatantly mischaracterize Veblen’s theories.
It is, however, heartening to see many online comments on these sorts of New York Times articles that attempt set the record straight–that is to say, to challenge the statements in these articles. Also, the likes of Pierre Bourdieu (The Social Structures of the Economy, Distinction: A Social Critique of the Judgment of Taste) basically try to (sympathetically) carry forward and expand upon Veblen’s theories in a modern setting, using contemporary statistical techniques to provide empirical support.