“Conspicuous consumption of valuable goods is a means of reputability of the gentleman of leisure.”
– The Theory of the Leisure Class
Thorstein Bunde Veblen (1857 – 1929) was an unorthodox American economist of Norwegian ancestry. He is considered the founder of the “institutional school of economics”, a group of economists who believed that traditional economic laws and theories had little validity.
According to Veblen, the prevailing attitudes of the day, along with the institutions (such as churches, schools, and business organisations), exerted a powerful influence on economic behaviour. In particular, Veblen believed it was the institutions to which people belong that mould their thinking. And because different people belong to different groups or institutions, their attitudes vary. For this reason, Veblen gave very little credit to economic laws and theories.
However, Veblen was particularly critical of one institution – the corporation. This is because Veblen made a distinction between industry (production for the satisfaction of human needs) and business (profit maximisation through market manipulation, restriction of product and other similar practices). In his view, businessmen were more concerned with the amount of profits they were making than with how much or what they could produce.
Veblen is best remembered for his work, The Theory of the Leisure Class, which was published in 1899. In this book, he argued that as society becomes wealthy, it becomes wasteful. People use their wealth not for intelligent living, but to impress their neighbours.
Every society, Veblen maintained, has a “leisure class” made up of wealthy members who do nothing but live in splendour and who engage in “conspicuous consumption”. Much of Veblen’s wrath in “The Theory of the Leisure Class” was directed at this class of people and their practice of spending in order to impress orders.
The purpose of conspicuous consumption is to acquire “status symbols”. According to Veblen, these status symbols had to be both expensive and useless in order to be acceptable to the leisure class. Such symbols were usually determined by the institutions and the changing fashions of the moment.
As examples of conspicuous consumption, Veblen cited the lavish parties and wedding receptions of the 1890s, which cost hundreds of thousands of dollars. Resulting from this conspicuous consumption was what Veblen called “conspicuous waste”. Thousands of dollars worth of food and drink was purchased for these parties, much of which was thrown out and therefore wasted – a practice that Veblen condemned.
It is easy to see why Veblen’s theories on the influence of institutions have gained acceptance in certain quarters. Today, while economists would generally agree that institutions are important influences on economic behaviour, most would not reject economic laws as readily as Veblen did.
In the Singapore context
However, Veblen’s concept of “conspicuous consumption” is quite clearly very much practised in modern Singapore. In fact, badges of “conspicuous consumption” are literally worn with pride by Singaporeans. Just witness the branded or designer goods that are actively pursued by the general population, and you’ll realise that the leisure class has indeed been hard at work.
The situation in Singapore will become more acute, as certain government policies seem to encourage conspicuous consumption. One example is the COE system, which not only has prompted car buyers to upgrade to bigger cars, but also spurred them to retire functional cars prematurely. This, inevitably, leads to much “conspicuous waste”. More on this in the article titled “Straightening the Straits Times (5)”.