The Concept of Conspicuous Consumption Introduced by Thorstein Veblen - Coursework Example

Conspicuous Consumption Introduction: Economics and economic theories have been extremely important in almost all aspects of life. The economic status of an individual is now recognized by the level of comforts and the amount of money spent on the lifestyle rather than on the amount saved. In the current time, most households, even the poorest, then to participate in some level or another in the twenty – first century luxury lifestyle. This change in lifestyle and consumer motivation to buy things that are much higher than needed for a standard living brings out the need to study the concept of ‘Conspicuous Consumption’ by Thorstein Veblen. This paper aims at understanding the concept of conspicuous consumption and how this concept is applicable in the current scenario. The paper will also include the disagreements and the criticism from various authors. Conspicuous Consumption: The concept of conspicuous consumption was introduced by Thorstein Veblen in the late nineteenth and early twentieth century. The term was introduced first in his book called ‘The theory of the Leisure Class’. Veblen used this term to highlight and explain the behaviour of the ‘nouveau riche’ during the early 19th century. Veblen explained that the Second Industrial Revolution had led to high levels of accumulated wealth. Veblen based this concept on this context and narrowed the concept to the upper class, where the levels of disposable income was high and is used for buying better grades of goods (Ng, 1987). Veblen explained this concept as the ‘quasi -peaceable gentleman of leisure’ had faced a high level of change and the consumption underwent a change in regard to the quality of the goods that were consumed. He explained that the people went on to explain that people consumed freely the best of everything including food, drinks, narcotics, ornaments and even idols and divinities. Veblen explained that the high need for reputability and the recognition of wealth was slowly becoming evident only by the use of excellent goods, hence people using anything in due quantity and quality was looked down upon or considered inferior (Veblen, 1925). Veblen (1925) explained that, “conspicuous consumption of valuable goods is a means of reputability to the gentleman of leisure. As wealth accumulates on his hands, his own unaided effort will not avail to sufficiently put his opulence in evidence by this method” (Veblen, 1925). Consumption is a major part of the standard living mainly in cities than that in the country. People in the city concentrate more on the quality and quantity of goods than the savings and the simple home comforts which are the main intent for people in the country. It has been noted that consumers were seen to be moving much faster than earlier times as they were fuelled by the new sense of empowerment based on the commercial affairs (Veblen, 1925). The majority of people and households tend to participate in the luxury lifestyle due to the shift in the levels of finances. This behaviour and indulgence of the consumers in the leisure goods and services can be the consideration of root cause for the concept of conspicuous consumption. In the previous years the author noted that people aimed at saving up as much as they could to have a peaceful future and a comfortable old age, even if it meant living a simple and luxury free present. It has also been studied that they way people spend their money has changed a great deal and it is noted that the consumers tend to spend higher levels of funds on the personal consumption (Veblen, 1925). The author also explains that the percentage of funds that were spent on food and clothing was normally higher than that on services however, post the second industrial revolution, the main focus to gain fame for the customers was by means of expenditures on superfluities. Since then, people have been recognized to be in a reputable position if they spent on unnecessary superfluities. As the author states, “In order to be reputable it must be wasteful” (Lee, 2000), clearly brings out the fact that consumption of goods had reached a level much higher than that needed for basic subsistence. The conspicuous consumption revolution also brought out the invidious comparison that was present, where people focused more on the standard of expenditure than on real things like the intellect, physical force, and most importantly the morals. Veblen also moves on to explain that, “Comparison in all these directions is in vogue to-day; and the comparison made in these respects is commonly so inextricably bound up with the pecuniary comparison as to be scarcely distinguishable from the latter. This is especially true as regards the current rating of expressions of intellectual and aesthetic force or proficiency; so that we frequently interpret as aesthetic or intellectual a difference which in substance is pecuniary only” (Lee, 2000). A very important point has also been made by the author and he explains that with the higher accumulation of wealth, there will be a direct increase in the functions and structure and thereby a higher differentiation within the class. The author explains, “With the inheritance of gentility goes the inheritance of obligatory leisure; and gentility of a sufficient potency to entail a life of leisure may be inherited without the complement of wealth required to maintain a dignified leisure” (Lee, 2000). Application of Conspicuous Consumption: The Office of National Statistics has in a recent study shown that the amount spent by people on the personal expenses over the years has grown a great deal. A recent research by Arrow and Dasgupta explained that, ‘A growing body of empirical work suggests that a person's sense of well-being depends not only on his own consumption, but also on his consumption relative to the consumption of his reference group’ (Arrow and Dasgupta, 2009). With the high level of competition that is prevalent in the markets and the ‘rat race’, people tend to work much harder and also consume much more than the maximum levels that are in place. As explained in ‘The theory of the Leisure Class’, by Veblen, "... the utility of both (conspicuous leisure and conspicuous consumption) alike for the purposes of reputability lies in the waste that is common to both. In the one case it is a waste of time and effort, in the other it is a waste of goods. Both are methods of demonstrating the possession of wealth and the two are conventionally accepted as equivalents" (Veblen, 1994). There have been several studies in the past which have highlighted the consumer behavior and its relationship with the income. Easterlin (2001) has speculated that generally there is an increase in the level of aspirations of people when there is an increase in the income (Leibenstein, 1950). He also explains that level of happiness tends to remain the same over the life cycle irrespective of the growth and increase in the level of income. Arrow and Dasgupta also explain that, “One way to model that would be to suppose that past (or habitual) consumption influences his aspirations. In this interpretation, a person's reference group is his own past selves, not others” (Arrow and Dasgupta, 2009). In the current economic conditions it has also been noted that a number of people spend on items that are not needed and most of the amount that is spent on personal consumption is growing in wants and not on needs. This in the current period has been known to be a major part of the nation’s economy (Frank, 1985a). It has been studied in recent studies that there are four main types of discretionary spending which include, a) Utilitarian purchases, b) Lifestyle Luxuries, c) Indulgences, and d) Aspirational Luxuries. The utilitarian purchases mainly refer to the discretionary purchases and most of these are not needed by the people. However people feel that these expenses tend to make their lives better in a meaningful and measurable manner. These expenses tend to provide the customers with an emotional satisfaction. Moving on to the indulgences, these refer to life’s little luxuries (Easterlin, 1995). Customers tend to buy these without guilt and these again provide the customers with a level of emotional satisfaction and these products tend to be of lower value yet are in some way extravagant and not essential for survival. In the current times, individuals also tend to spend a large amount of money on lifestyle luxuries, like cars, pen, watches, and even fine china, which can be considered as practical needs and can be defined as a quantum leap beyond the basic needs of the basic essential purpose. The last type of spending is the aspirational luxuries. These are more so for the ‘joy’ of buying and these include items like original art, antiques, and collectables (Duesenberry, 1949). These help give a status symbol for people and are generally ties to ‘brands’. These items tend to be bought to allow the customers make a statement about themselves, their aspirations and what they stand for. Looking at the current spending pattern of the individuals, it is clear that the level of spending of the customers is much higher than that needed for the normal expenses and for the basic needs (See Appendix: National Statistics: Family Spending 2009). A Critical View of Conspicuous Consumption: One of the biggest criticisms to the Theory of Conspicuous Consumption has been by H.L. Mencken, who does not believe in this theory due to the fact that the concept of conspicuous consumption does not provide a clear definition and it cannot label luxuries and practices. He mentioned in one of his works, in a very sarcastic manner in reference to conspicuous consumption saying, ‘Do I enjoy a decent bath because I know that John Smith cannot afford one – or because I delight in being clean? Do I admire Beethoven's Fifth Symphony because it is incomprehensible to Congressmen and Methodists – or because I genuinely love music? Do I prefer terrapin à la Maryland to fried liver because plowhands must put up with the liver – or because the terrapin is intrinsically a more charming dose? Do I prefer kissing a pretty girl to kissing a charwoman because even a janitor may kiss a charwoman – or because the pretty girl looks better, smells better and kisses better?’ (Mencken, 1919). He further went on to justify saying that the what a number of people call a ‘waste of money’, can be the enjoyable luxuries for others and it is the taste of people that matters on which the conspicuous consumption depends. He also gave an excellent example stating that he found golf to be a conspicuous luxury while it could be one form of bread winning activity for a dedicated golf player. Hence according to Mencken, no activity can be defined as a conspicuous consumption because the taste of people differ and hence the definition as well. Another one of the biggest critics of this theory is an elitist, Herbert Marcuse. He suggested that it would be best for the highly educated groups to classify items of luxury from those which were not and this would help define conspicuous consumption to a better extent. Another one of the recent and apt criticism has been by the author of ‘The Worldly Philosophers’, Robert Heilbroner, who has suggested that Veblen’s theory was not incorrect, however it was apt in the time he wrote the book (Tilman, 2006). Conclusions: Based on the above discussion and the various criticisms that have been presented over the years, it is clear that the theory by Veblen was in no manner an incorrect theory. However if this is thought about more practically and considering the level of development that the world has faced since his time, this theory cannot be applicable and as Heilbroner suggested, the theory is invalid in the current time (Cooper, Garcia-Penalosa, and Funk 2001). This is simply because the world has moved on past the second industrial revolution and over the years the world has faced several changes which in fact has allowed people to spend more on the so called luxuries to be able to cope with the current life style and the level of stress. Hence I do not completely agree with the theory by Veblen, and agree to the fact that the change has been there, however it has been for the better and the world has changed and developed a great deal since his theory. Bibliography Arrow, K. and Dasgupta, P., (2009), “Conspicuous consumption, inconspicuous leisure”, Economic Journal, Economics Discussion Paper Series EDP 0903 (School of Social Science, Manchester University) Cooper, B., C. Garcia-Penalosa, and P. Funk (2001), "Status Effects and Negative Utility Growth," Economic Journal, 111(2), 642-665. Duesenberry, J.S. (1949), Income, Saving, and the Theory of Consumer Behavior (Cambridge, MA: Harvard University Press). Easterlin, R. (1974), "Does Economic Growth Improve the Human Lot? Some Empirical Evidence", in P.A. David and M. Reder, eds., Nations and Households in Economic Growth: Essays in Honor of Moses Abramowitz (New York: Academic Press). Easterlin, R. (1995), "Will Raising the Incomes of All Increase the Happiness of All?", Journal of Economic Behaviour and Organization, 47(1), 35-47. Frank, R. (1985a), Choosing the Right Pond: Human Behavior and the Quest for Status (New York: Oxford University Press). Lee, M. (2000), The consumer society reader; (Oxford: Blackwell Publishing Ltd.) Leibenstein, H. (1950), "Bandwagon, Snob, and Veblen Effects in the Theory of Consumers' Demand", Quarterly Journal of Economics, 64(1), 183-207. Mencken, Henry Louis (1919). Prejudices. First series. New York: Knopf.. OCLC 325153 National Statistics, (2010), Family Spending 2009: Households spend £471 a week, 14th January 2010, Accessed on 16th January 2010, Retrieved from http://www.statistics.gov.uk/CCI/nugget.asp?ID=284 Ng, Y.K. (1987), "Relative Income Effects and the Appropriate Level of Public Expenditure," Oxford Economic Papers, 39(2), 293-300. Tilman, R.,2006, Colin Campbell on Thorstein Veblen on conspicuous consumption.(criticism on Veblen theory), Journal of Economic Issues, Michigan Veblen, T. (1925), The Theory of the Leisure Class: An Economic Study of Institutions (London: George Allen & Unwin). Appendix Appendix 1: National Statistics: Family Spending 2009 Average weekly household expenditure on main commodities & services (National Statistics, 2010) Read More