DEFINITION of 'Thorstein Veblen'
An economist and sociologist who lived from 1857 to 1929 and who is best known for coining the term “conspicuous consumption” in his book “The Theory of the Leisure Class” (1899). He was interested in the relationship among the economy, society and culture. He analyzed the social order and believed that people made purchases to signal their economic status and accomplishments to others. Veblen critiqued the consumption habits of the wealthy and questioned their values. He coined the terms “conspicuous waste” and “pecuniary emulation” (striving to meet or exceed someone else’s financial status). He also founded the school of institutional economics.
BREAKING DOWN 'Thorstein Veblen'
Because of Veblen’s analysis, we have the concept of a Veblen good, a product whose demand increases as its price increases because consumers consider it an exclusive status symbol—in other words, a product that is consumed conspicuously. Veblen goods are designer, luxury items with a strong brand identity. They are not sold in regular stores and are highly coveted. Consumers perceive them as being more valuable because of their higher price. These goods are priced so high that only the very affluent can afford them; the higher their price, the less likely other consumers can afford them, and the more buyers perceive them to signal great wealth and success. If a Veblen good's price decreases, demand will decrease because status-conscious consumers will see it as less exclusive. Veblen considered this conspicuous consumption to be wasteful.
The biggest job of Veblen’s career was with the University of Chicago from 1892 until 1906, where he started as a teaching assistant and advanced to become a research fellow, assistant professor and the managing editor of the Journal of Political Economy. His experiences in academia led him to criticize the higher education system in another book, “Higher Learning in America” (1919). Born in America to Norwegian immigrants, Veblen was an outsider and nonconformist with unusual behavior and unconventional views; he rejected neoclassical economics, Marxism, pragmatist philosophy and laissez-faire economics. He wanted to integrate economics with sociology and history to show how the discipline was influenced by human biology and psychology.