Conspicuous consumption describes the phenomenon whereby goods and services may be purchased for the principal purpose of emphasizing the buyer’s wealth and social position. It is an idea popularized by the American economist and sociologist, Thorstein Veblen, in his 1899 work, The Theory of the Leisure Class.
Veblen wrote his most famous work during America’s Gilded Age, when rapid industrialization had created a new class of the super-rich. It was the age of Rockefeller and Carnegie, Mellon, Guggenheim and Vanderbilt – ‘robber barons’ to some, ‘captains of industry’ to others. They and their families enjoyed fabulous lifestyles, their ostentatious spending gaining notoriety across the globe. Consider, for instance, the extraordinary parade of Newport Mansions on Rhode Island, monuments to the desire of one affluent family to outdo another in opulence.
While conspicuous consumption is most obviously expressed in the decadence of the wealthy, it is not restricted to the rich. The poor may engage in it just as easily, as long as there is someone else whose relative social position may be suppressed as theirs is elevated. These were significant insights in an age when economists worked on the basis that consumers are entirely rational. Veblen showed how we are, in fact, subject to a host of social and psychological factors when we make economic decisions. Whether we actually want or need a good or service is just part of the picture.
Out of Veblen’s ideas arises the concept of ‘Veblen goods’ – usually luxury items (such as high-end jewellery and supercars) that are subject to increased demand as their price rises, in contravention of normal market rules. The high price tag is integral to exhibiting social status, so that a reduction in price reduces the satisfaction obtained by purchasing them. Veblen warned against fostering a ‘relative consumption trap’ where a nation’s production capacity is excessively focused on that which is glamorous and desirable at the expense of that which is necessary.
Veblen has been the focus of renewed interest in recent years. In light of the global economic downturn caused in part by the accumulation of high levels of personal debt, his notion of conspicuous consumption – ‘a means of reputability to the gentleman of leisure’ – feels more vital than ever.
Consumerism and egoism
Traditional economic thought suggests consumers buy out of a desire to feel the satisfaction of consuming a particular product. Veblen, though, saw something else in the growing tide of consumerism. Utility plays a part in consumption, of course, but also important is the desire to emphasize one’s elevated social status (and by extension, the lower status of others). ‘The possession of wealth’, Veblen wrote, ‘confers honour; it is an invidious distinction.’ Consumption thus becomes in part an act of egoism: ‘So soon as the possession of property becomes the basis of popular esteem . . . it becomes also a requisite to the complacency which we call self-respect.’