conspicuous consumption

Conspicuous consumption is a term used to describe the lavish spending on goods and services acquired mainly for the purpose of displaying income or wealth. In the mind of a conspicuous consumer, such display serves as a means of attaining or maintaining social status. A very similar but more colloquial term is "keeping up with the Joneses".

Invidious consumption, a more specialized term, refers to consumption deliberately intended to cause envy.

History and evolution of the term

Thorstein Veblen was a Norwegian-American sociologist and economist, and a co-founder of the institutional economics movement.

The term conspicuous consumption was introduced by economist and sociologist Thorstein Veblen in his 1899 book The Theory of the Leisure Class.^[1] Veblen used the term to depict the behavioral characteristic of the nouveau riche, a class emerging in the 19th century as a result of the accumulation of wealth during the Second Industrial Revolution. In this context, the application of the term should be narrowed to the elements of the upper class who use their enormous wealth to manifest social power, whether real or perceived.

With significant improvement of living standards and the emergence of the middle class in the 20th century, the term conspicuous consumption is now broadly applied to individuals and households with expendable incomes whose consumption patterns are prompted by the utility of goods to show their status rather than any intrinsic utility of such goods. In the 1920s, economists such as Paul Nystrom theorized that lifestyle changes brought on by the industrial age were inducing a "philosophy of futility" in the masses, which would increase fashionable consumption. Thus, the concept of conspicuous consumption has been discussed in the context of addictive or narcissistic behaviors induced by consumerism, the desire for immediate gratification, and hedonic expectations.

Whereas previously, conspicuous consumption was thought to be something engaged in primarily by the rich, recent research by economists Kerwin Kofi Charles, Erik Hurst, and professor of finance Nikolai Roussanov points to a different understanding, that conspicuous consumption is more common among poorer groups of people and emerging economies. Displays of wealth in these groups serve to combat the impression that a person is poor, often because they are a member of a group perceived by society as poor.^[2] The 1996 book The Millionaire Next Door also challenges the traditional views on conspicuous consumption by looking at the wealthiest Americans, finding that most millionaires are quite frugal and lead modest lifestyles.^[3]

Conspicuous consumption and housing

In the U.S., a trend in 1950s towards large houses began, with the average size of a home about doubling over a period of 50 years. This trend has been compared to the rise of the SUV, also often a symbol of conspicuous consumption. People have purchased huge houses even at the expense of the size of their yard, the inability to save funds for retirement, or a greatly increased commute time, up to a couple of hours. Such large homes can also facilitate other forms of consumption, in providing extra storage space for vehicles, clothes, and other objects.^[4]

Social and economic effects

Since socio-economic status (the socially-created effects of wealth or income) is a positional good which is in fixed supply, any conspicuous consumption generates negative externalities. In fact, conspicuous consumption may be seen as the in-kind scarcity rent of socio-economic status. Minimizing economic inefficiency by capturing this rent and curbing wasteful consumption is an important argument for luxury taxes and other corrective policies. As John Stuart Mill argued:

Luxury taxes have some properties which strongly recommend them. In the first place, they can never... touch those whose whole income is expended on necessaries; while they do reach those by whom what is required for necessaries, is expended on indulgences. In the next place, they operate in some cases as... the only useful kind of sumptuary law. I disclaim all asceticism, and by no means wish to see discouraged, either by law or opinion, any indulgence (consistent with the means and obligations of the person using it) which is sought from a genuine inclination for, and enjoyment of, the thing itself; but a great portion of the expenses of the higher and middle classes in most countries [is incurred] from regard to opinion, and an idea that certain expenses are expected from them, as an appendage of station; and I cannot but think that expenditure of this sort is a most desirable subject of taxation. If taxation discourages it, some good is done, and if not, no harm; for in so far as taxes are levied on things which are desired and possessed from motives of this description, nobody is the worse for them. When a thing is bought not for its use but for its costliness, cheapness is no recommendation. As Sismondi remarks, the consequence of cheapening articles of vanity, is not that less is expended on such things, but that the buyers substitute for the cheapened article some other which is more costly, or a more elaborate quality of the same thing; and as the inferior quality answered the purpose of vanity equally well when it was equally expensive, a tax on the article is really paid by nobody: it is a creation of public revenue by which nobody loses.

Other perspectives

Dick Meyer of CBS News argued that conspicuous consumption is an antisocial behavior arising from alienation caused by anonymity and the breakdown of communitarian ties, calling conspicuous consumption "Aggressive Ostentation".^[5]

Remedies for conspicuous consumption

Economist Robert H. Frank proposed eliminating income tax and replacing it with a progressive tax on the amount spent each year, as a way of curbing conspicuous consumption.^[6]

See also

Look up conspicuous consumption in Wiktionary, the free dictionary.

References

External links

• Theory of the Leisure Class by Thorstein Veblen at Project Gutenberg
• Thorstein Veblen: Conspicuous Consumption, 1902 at Fordham University's "Modern History Sourcebook"
• Conspicuous consumption at its worst... shooting at Toys R Us on Black Friday
• Wal-Mart employee trampled to death by shoppers hungry for deals.