An institutional analysis of modern consumption patterns would, of course, look first and foremost to a society’s institutions to explain these behaviors.  Our tastes and preferences, in this view, are primarily the result, not of some abstract lightning calculation of marginal utilities per dollar, but rather of the common habits of thought shared among our peers, our family, and our society more generally.  They do not emerge miraculously from each of our individual constitutions.  Instead, they are the result of an institutional evolution, occurring in part by unplanned drift, and in part by intentional acts of problem solving, ceremonial observance, and persuasion.

In this view, we’re consuming the things we consume today largely because we learned that those things are appropriate to consume.  And, importantly, the institutions that define what is and is not appropriate do not entirely reflect what is most conducive to nurturing individual well-being, social cooperation, and sustainable uses of technology.  Rather, they will reflect in part the imbecile and anachronistic habits of thought inherited from our past.

Take for instance one of Veblen’s best-known concepts, conspicuous consumption: consuming goods not for their capacity to produce personal satisfaction (utility), but rather because they allow the consumer to demonstrate or enhance her prestige.  Surely, a host of examples come to mind readily: designer clothing that serves no better as clothing than equivalents without the brand recognition; upscale dining establishments serving food that is no more nutritional than their more modest counterparts; sports cars that, while perhaps hypothetically capable of winning high-speed races, are no better at what they’ll actually be used for (driving around town and sitting in traffic) than an ordinary automobile.  What do all of these have in common?

While one could argue that each of these examples is a good or service of a higher quality than their cheaper alternatives, most people would easily recognize that there is an element in each allowing one to conspicuously consume–to ‘show off’ the fact that one has the money to make purchases that others simply could not afford.  The question becomes, why would someone go out of their way to spend money on things that, in fact, don’t provide additional utility or value in use?  And, as you might have guessed, answering this question requires an analysis of the institutions that guide our consumption decisions in modern society. The following breakout box points the way toward Veblen’s ultimate conclusion.

Conspicuous Consumption in 19th Century Clothing

In 1894 Thorstein Veblen published his “Economic Theory of Woman’s Dress” , breaking down the characteristics of the apparel of his time that offered the consumer something more than simply protection from the elements.  His three cardinal principles of women’s dress, each of which was “advertising the fiction that they live without any gainful occupation,” were:

1. Expensiveness: clothing “must be uneconomical”–that is, demonstrating that the wearer, or more commonly her family, has the means to waste money on items of little functional value. High-dollar brand names make this easier to recognize for the uninitiated; but ultimately the expense of the work and material that went into producing these items is a more subtle, sophisticated way of indicating the same thing.
2. Novelty: to the extent that clothing is useful, the wearer must not get the full use value from it. She must discard articles well before even insignificant wear starts to show.  Observing seasonal changes in fashion helps to coordinate and enforce this sort of consumption observance.
3. Ineptitude: clothing must show that the wearer doesn’t have to participate in useful work. For instance, clothing might be severely binding, or footwear might restrict movement.

Although Veblen’s work has often been misunderstood as satire it was actually proper scientific research, just looking at a subject that rarely receives such scrutiny: institutions. In truth, the analysis of women’s dress should not be taken as either exclusive to that particular type of good, nor as mockery of how the ladies of Veblen’s time dressed. Instead, it was a study of how people think, how that influences the way they behave, and crucially the historical reasons for why people think the way they do. In the case of women’s dress this unavoidably requires a look at gender norms and inequality; and because he considered these in his research, Veblen has sometimes been called the first feminist economist. (This combination, of feminist and economist, probably remained unheard of in the field until much later, with the International Association for Feminist Economics not being founded until the 1990s.  For more information on feminist economics, visit www.iaffee.org.)

Can you think of any examples of consumption goods outside of women’s apparel that fit this description?  My personal favorite comes from men’s professional apparel: the necktie.

As you’re probably aware, neckties don’t serve much of a function–they’re certainly not providing warmth, and in fact they’re not even covering up an otherwise naked part of the body.  So why do some men find themselves compelled not only to buy and wear these products, but to periodically discard the old ones and purchase new ones?

A common response from students is: they make you look professional.  But, that just begs the question, why do they make you look professional–that is, why do we associate neckties with professionalism?  Surely men in most professions don’t actually make use of the tie in their work (though I’ve found they make a convenient wipe for smudged eyeglasses).  Consider Veblen’s cardinal principles above as applied to the necktie.

1. Expensiveness: while presumably whatever function neckties serve could be equally well-served were they made from a relatively inexpensive material like cotton (or, for that matter, paper), they tend instead to be made of more expensive materials like silk.
2. Novelty: those who follow men’s fashion will know that neckties are subject to similar style changes as other types of clothing–in terms, especially, of patterns and widths. Most people are probably able to discern a tie that was purchased in the 1980s versus the 2010s, much as most people can give a rough date to when a car was produced just by looking at it.
3. Ineptitude: paradoxically, to demonstrate professionalism, men are often expected to wear apparel that does more to hinder than to aid their capacity for work. The delicate and expensive fabric, for instance, indicates that the ‘professional man’ is not likely doing work that would involve ‘getting his hands dirty’ in the literal sense.  Likewise, it would not typically be wise to wear a long necktie in a manufacturing context in which machines are being used, lest the tie get caught in the machine.

These are strange principles by which to guide your consumption goods, indeed; and certainly not ones that are limited to women’s dress–or even clothing in general.  A little reflection on modern culture and the reader could probably see these principles in much of what we consume today.  But, again, why are these apparently useless and even wasteful elements so desirable to the modern consumer?  Why would someone want to waste money, or to show off they they don’t contribute to society?  The remainder of this section will give a summary explanation.

It goes almost without saying that, as social creatures, we humans feel a sense of self-esteem based in part on how we think others see us.  We strive to fit in, to avoid feeling inferior, and at times to show our superiority to others–which, of course, must make others feel inferior.  But, how we do so is dictated by the accepted social norms–the institutions–that we were born into; and those institutions have mutated through generations to produce a ‘strange’ set of criteria for who is superior and who is inferior–that is, for what institutional economists call invidious hierarchies.

In much earlier times one’s prowess, the respect afforded by one’s peers, would reflect chiefly the capacity to ably accomplish something that was useful to the group.  As humans’ technologies improved, however, it became increasingly the case that:

1. The greatest contribution to current productivity came from the countless generations of workers, inventors, engineers, and so on from whom society had inherited its industrial arts. And,
2. As technologies became increasingly sophisticated, more and more people, each having increasingly specialized skills, were necessary to efficiently produce things with these more sophisticated technologies.

The problem with these developments is that it becomes very difficult to differentiate one person’s contribution from another’s, or, more accurately, from the general productivity of the group acting collectively.

Consequently, over a very long time the presumption developed that how much you contributed relative to others would simply be reflected in how much money you made (whether this is true or not is another matter altogether).  But this presented a problem for establishing the amount of prestige others should afford you: how much you have in your bank account isn’t typically public information, and politeness dictates that you shouldn’t go around waving your most recent ATM account balance slip in people’s faces.  The solution?  Demonstrate your prowess, as evidenced by your vast riches, by wasting money wherever possible.

Part of this anthropological history, which can only be given in the most rudimentary of forms here, also demonstrates a division of employments in terms of prestige.  In particular, early humans garnered prestige from exercising their power over the natural world–hunting and killing large game, or controlling the floods through irrigation channels, for instance.  However, once technologies improved, it became increasingly the case that demonstrating power meant controlling or extracting from the productive community itself–that is, from people–more so than from nature.  As a result, the higher classes came to be associated with occupations of predation, control, and leisure–for instance, politics and war, management and finance, celebrity and fashion. With consumption as the chief way to demonstrate, and to reinforce in the minds of one’s peers, that one belongs to the ‘better’ class of people, our institutions began to prescribe an element of ineptitude, showing exemption from useful labor.

Glossary

conspicuous consumption

consuming goods not for their capacity to produce personal satisfaction (utility), but rather because they allow the consumer to demonstrate or enhance her prestige

cardinal principles of dress

the three ways in which clothing can help to ‘show off’ status and wealth.  Thorstein Veblen analyzed these in relation to women’s dress, but they can be applied to many other consumption goods as well

invidious hierarchy

the evolved, socially constructed systems by which people judge themselves and others to be fundamentally inferior or superior to others