Meining Yu

MeiningYu

Economics423

Fall2014

FifthTake-Home Essay

Veblen`stheory of conspicuous consumption

Veblen talked about thetheoryof conspicuousconsumptionin his “The Theory of Leisure class.”This theory stillaffectspeople’ dailylivesup to date.Veblen statedthatpeoplein the leisureclasspreferto purchaseexpensiveproducts,especiallyluxuriousgoodsin orderto demonstratetheir wealthorsocialstatus.Recently,there wasa groupof Fuerdais(a Chinese termwhich meansthesecondgenerationof rich)that showedtheir dozens of Patek Philippe watchesor“wine bowling”on socialnetworks.Thebehaviorof thoseFuerdaisis theobviousperformanceof conspicuousconsumption.

In “The Theory of LeisureClass”, Veblen claimedthatholdingwealthorpoweris not enoughto havedignityandto maintaindignity.AsHeilbroner notes,“Veblen, in his brocaded prose, embroideredthethesisthattheleisureclassadvertisedits superioritythrough conspicuousexpenditure(blatantorsubtle),andthatits ownhallmark(leisureitself) wasenjoyedby beingdangledbefore theeyesof thepublic”(TheWorldly Philosophers, Chapter 9).Conspicuousexpenditureis a methodusedto provefortuneandauthority.In moderntimes,conspicuousconsumptionis definedby thetendencyof high-class peopleto flauntdeeppocketsandpositionby usingwastefulpartsof products.Thewastefulpartof productsindicatesa portionthat exceedsthepracticalandsurvivalrequirement.

There are manyexamplesof thetheoryof conspicuousconsumptionin people’slives.InMiami University, I noticedthatmostChinese studentspreferto buyluxurycarssuchas Maserati, Aston Matin, andAudi R8. Since mostof thosestudentscomefrom wealthyfamilies,theyfeelexcitedwhilecomparingfinancialpowerthrough purchasingextravagant andunpractical goods.Moreover,theytryto selectfriendsby showingoff since richChinese studentsliketo makea goodrelationshipwith studentsfrom a similarbackground.Notonlydotheyshowcase thephysicalaspect,thegroupalsogainsmentalsatisfactionwhenbegrudgedby others. Thisphenomenonis a typicalexpressionof conspicuousexpenditures.

In thepresenttimes,thethoughtof consumingluxurygoodshas spreadinto lowerclasses.Manyworkersorcollegestudentspursuehigh-end merchandise,eventhoughtheyneedto savemoneyformonthsoryears.In China, a girlcalledManuosaidthatshewould rathercryin a BMW carthan laughon thebackseat of a bicycle,which reflectsa formof blindshowoff andmoneyworshipamong theyounggenerations.Suchpeoplejustfollowtherichmenwhodisplaytheir ownabilityorstatus.

Conspicuousconsumptionhas its positiveeffectson theeconomy,which maketoday’sgovernmentsupportthemanufacturingof luxuryproducts.First,to satisfythedesiresof consumers,companiesneedto produceluxuriousgoodsandprovidean environmentthat enablesbuyersto splashmoneyon theproducts.Theconsumptionof upscale goodsandservicecan increasetheGDP. In 2013, revenuesfrom luxurygoodsmarketgrew50% fasterthan global GDP. In 2015, global luxuryrevenuesare expectedto getmorethan $322 billion (Carr, 2013since themanufacturingprocessneedsworkers,high-grade productmarkethelpsto reducetherateof unemployment.Therefore,rationalconspicuousexpenditurewill leadto economicdevelopment.In addition,besides producers’incomes,governmentcould earnprofitsby collectingbothsalesandincometaxes,which will contributeto thetransferof assets from the leisureclassto governmentalinvestment.

In my opinion,Veblen’s theoryof conspicuousconsumptionis relevantto thecontemporarytimes.Thisis becausemanyconsumersstilltrytheir bestto purchaseexpensivegoodsandservices.Consequently, theconspicuousconsumptionspreads into manyareas.Forexample,wealthyfamiliestaketheir childrento elite schools,andsomeyoungrichpeopleare interestedin joiningexclusiveclubs.In a nutshell, itcan be concludedthatitis difficultto totaleliminatetheconspicuousconsumptionbehaviors,which has resultedfrom socialandeconomicdevelopment.Weshould encouragetherationalluxuryexpenditures,butat thesametimerejectblindspending.