Thorstein Veblen, a name barely recognised outside academic circles, was a revolutionary economist who challenged the core tenets of his discipline and called out displays of wealth. Mary V. Wrenn, talks to The Mint about his pioneering contribution.

Thorstein Veblen was not your typical economist, says scholar Mary Wrenn. He was, Wrenn says, a pioneering interdisciplinary social scientist, a quality that distinguished him from his more narrowly focused contemporaries, and this perspective shaped his trenchant critique of economic norms. “When you’re studying how human beings behave, you must consider the entire picture,” Wrenn says. “You need to examine the political context in which they live, the cultural environment, the educational system, and their social relationships.”

Veblen contended that consumption is not merely driven by rational needs or utility.

Veblen’s most influential work, The Theory of the Leisure Class, published in 1899, introduced concepts that are more relevant than ever in our consumer-driven society. Wrenn highlights his most famous contribution: “If anyone is familiar with the term conspicuous consumption, Thorstein Veblen coined that term.” This concept, which describes how the wealthy elite display their wealth to signal social standing, was a groundbreaking challenge to traditional economic thought.

Veblen contended that consumption is not merely driven by rational needs or utility. Rather, it is significantly shaped by social pressures, the pursuit of status, and the aspiration to emulate the affluent. The “leisure class,” as Veblen referred to the wealthy elite, engaged in “conspicuous consumption”—extravagant displays of wealth that served no practical purpose other than to showcase their social superiority.

A central theme in Veblen’s critique is the inherent wastefulness of conspicuous consumption. He argued that the pursuit of status through material possessions leads to a misallocation of resources and a disregard for genuine human needs. In their quest to outdo one another, the wealthy engage in increasingly extravagant and often absurd displays of wealth, spending vast sums of money on items that possess little or no intrinsic value.

Wrenn explains how Veblen perceived this: “While mainstream economics of his time certainly wouldn’t regard that as a rational sort of behaviour, Veblen argued that, no, this is actually very rational behaviour when you consider the social context.” In other words, the seemingly irrational behaviour of conspicuous consumption becomes logical within the framework of social competition and status-seeking. Nevertheless, Veblen emphasised that this “rational” behaviour, driven by social pressures, leads to enormous waste.

This waste manifests in various forms, such as the squandering of resources on luxury goods, the chase after fleeting trends, and the manufacturing of products intended for obsolescence, all to showcase wealth and status. Veblen regarded this as a fundamental flaw of capitalist society, where the quest for profit and social standing often outweighs efficiency and public welfare.

He argued that the pursuit of profit often leads to the deliberate creation of scarcity and waste –  planned obsolescence, for instance.

Veblen’s critique extended beyond individual behaviour to include a systemic analysis of industrial capitalism. He was profoundly concerned with the tension between “industry” and “business.” For Veblen, “industry” referred to the production of goods and services aimed at satisfying genuine human needs. In contrast, “business” focused on profit-seeking and financial manipulation, often at the cost of productive activity.

He argued that the pursuit of profit often leads to the deliberate creation of scarcity and waste. Planned obsolescence, for instance, where products are designed to break down rapidly, serves as a method for businesses to generate demand and boost profits, even though it results in significant resource waste and increased costs for consumers.

Veblen regarded this waste as a symptom of a system that prioritised profit over social good. His critique resonates with contemporary concerns about consumerism, environmental degradation, and the unsustainable nature of our economic system.

Enduring legacy

Veblen’s insights remain remarkably relevant in the 21st century. His analysis of conspicuous consumption helps us comprehend the dynamics of consumer culture, in which status symbols, brand names, and the relentless pursuit of the latest trends often take precedence over genuine needs and sustainable consumption patterns. His critique of waste and the misallocation of resources speaks directly to our current environmental crisis and the urgent need for a more sustainable economic model.

Wrenn highlights Veblen’s enduring influence: “His ideas remain very much present in our discourse.” His work offers a robust framework for comprehending the social, cultural, and frequently extravagant aspects of economic existence. It encourages us to look beyond simplistic models of rationality and to contemplate the intricate interplay of forces that shape our economic behaviour and consumption patterns.

Although his work was often satirical and challenging, it offered profound insights into the workings of modern society.

Thorstein Veblen was a visionary and a critic, a thinker who dared to question the fundamental assumptions of his time. Although his work was often satirical and challenging, it offered profound insights into the workings of modern society. In an age of increasing inequality, rampant consumerism, and growing environmental concerns, Veblen’s analysis of waste and the irrationality of conspicuous consumption remains a powerful call for a more rational, sustainable, and equitable economy.

Wrenn’s exploration of Veblen’s ideas reminds us that economics is not merely about abstract numbers and models; it fundamentally concerns the comprehension of human behaviour, social structures, and the ethical implications of our economic choices. Veblen’s legacy urges us to move beyond narrow definitions of rationality, to confront the wastefulness of our consumer culture, and to aspire to an economy that meets human needs and safeguards the planet.

You can watch the full interview  on YouTube here. This article version of the interview was written with the help of AI.