Veblen's argument on consumption and social class

Veblen's Argument

Veblen believed that "economic outcomes are shaped in large part by social institutions, which introduce other motivations into human activity" (JRank, no date). This contradicts the view that markets direct self-interest towards societal norms. Veblen viewed the relationship between the markets and human motivations as the reverse. His views derived from the convergence of economics with sociology, wherein he viewed the latter as being a key driver of the former, not vice versa.

For Veblen, behavior is individually and socially determined. The factors that influence this behavior change over time through the evolution of social institutions. These institutions are the primary driver of consumer behavior. They set the market by driving demand. Veblen proposed that conspicuous consumption was driven by social settings and the desire of consumers to impress each other and gain social status. This behavior, he noted, was irrational. There was no causal linkage between the market and conspicuous consumption. The market, therefore, is at best a partial determinant of consumer behavior.

For consumers, the market lacked relevance. More important were the social institutions and constructs that guided their lives. It was social institutions that defined one's standing in society, and that consumers typically behaved in a manner that would improve their standing in society. The markets -- outcomes -- are the result of his activity. The causal relationship to Veblen worked the other way from consumers to the market, not the other way around as the argument that the market directs self-interest towards societal interest holds. For that argument to hold true, the market would have to dictate the terms of social mobility and create the social institutions. Veblen did not see this as the case.

It is worth considering that there may be underlying economic reasons for social standing -- at least when Veblen's argument is viewed from the present. Social standing can be a means to economic opportunity. The better one's standing, the more opportunities will be available and the fewer barriers there will be to taking advantage of those opportunities. As a result, there may have been an underlying economic reason for consumers to engage in conspicuous consumption. It may not have been irrational at all. It would be interesting to see Veblen's response to such a supposition, given that it would have run counter to his underlying views about humanity and its motivations.

However, Veblen did not view consumption that way. He viewed consumption more from the framework of a desire to "imbue experience with aesthetic unity" and that humans cooperate to shape their environments for the common good (Throntveit, 2008). Veblen's argument therefore is that human behavior creates the markets; the markets do not create human behavior. Indeed, markets do not have the power to create human behavior as humans are guided by different principles.