Ritchie on Veblen

First, such consumption, supported by a whole PR industry that starts with the FT’s ‘How to spend it’ and flows on from there, this spending is designed to distort economic perception and create imbalance: this is what Thorsten Veblen taught a century or so ago, even if his work is largely ignored by economists now.

Nobody at all ignores Veblen. His insights are now central to a certain part of economics. The whole idea of conspicuous consumption is built on it. Top end iPhones, Luis Vuiton, Grey Goose vodka, absolutely everyone, from economist through businessman to stock analyst knows what’s going on here.

Hell, we even call them Veblen Goods. What is this claim to “ignoring”?

25 thoughts on “Ritchie on Veblen”

  1. I think Ritchie means ignored by economists because he didn’t get that far in his economics module before dropping out.

  2. But does he want to ban such goods, regulate the price of such goods? Oh no, set up a committee to vet purchases over £10000 on credit cards issued in tax havens (why that makes any difference is anyone’s guess).

    As for 67% of Chinese luxury purchases being made overseas, well of course they bloody are. China levies a 17% GST while Hong Kong has no such tax, an attempt to introduce one a few years ago met with huge popular resistance. My cursory comparative shopping earlier this year confirmed that luxury goods are considerably cheaper in HK.

  3. Aren’t Veblen goods goods for which demand (rather than just desire) increases with increasing price? You can conspicuously consume a Mercedes S-class but it’s still great value for €80-€100k. I’m not convinced increasing the price would increase sales though.

  4. Quite a striking red, white, and black cover of his book “The Courageous State”

    The same colour scheme was very fashionable in another courageous state the socialists set up in Germany back in the 30’s.

  5. I know it’s fashionable to emphasise the “socialist” in “national socialist” these days but I’m not sure it’s helpful. If anything it illustrates that the the left-right dichotomy died at the latest in the 1930s, rather than more recently. Sure, the Nazis shut down the communists before moving on to the rest of the opposition, because they were after the same votes, yadda yadda, but their definition of “society” was still a much narrower one than that of any self-declared socialist or communist.

    Socialists today seem to have fallen into a similar trap to those who selectively apply Keynes (by advocating deficit spending in recessions, and then advocating deficit spending in booms). In that we should run a society in which we constantly subsidise the unproductive rather than all pulling together and sharing the burden as well as the fruits. The constant yammering about having to thus subsidise unproductive immigrants only underlines that socialism is only viable with a strong border policy. On the historical evidence, one that serves to keep people in as much as out.

  6. Isn’t conspicuous consumption good though? For the proles I mean?

    If Kim Kardashian and her ilk all bought $15 handbags from Walmart, would that not result in less employment overall in the handbag industry? A few thousand extra sales for the mass market producers who make tens of millions per year would create no new jobs, but the luxury makers would all be broke and all the jobs lost.

    Isn’t this just another manifestation of RMs puritan/socialist ideal of us all riding around on identical bicycles in grey boiler suits?

  7. Jim, agreed. It is one thing to recognise positional goods, quite another to spew sacntimoniously about them.

    BTW, he gave me a lovely preview on his studies of Veblen a few weeks ago. Apprently the rich give to charity for non-charitable reasons as explained by Veblen (being nice makes them feel good about themselves, the bastards). They also give for tax avoidance reasons, so tax relief should be removed. However, charities won’t suffer because the behaviour of the rich won’t be asltered by losing the tax breaks. And there’s no contradiction in there because of Veblen.

    He out-thought me there I’m afraid (?????)

  8. Perhaps he means ‘the first time I heard of it was when I was Googling for this piece”, and because he’s brilliant, he would have known about it if it was important, so it must be ‘ignored’.

  9. @JasmesV
    “..but their (Nazi) definition of “society” was still a much narrower one than that of any self-declared socialist or communist.”
    I was just reading about a Soviet cosmonaut trainee who was nixed from the Soviet space program by…guess…being part Jewish. So not so narrow?
    And you really do need to meet some Russians, grew up & were educated in the communist era.

  10. Well, at least he was passed over for promotion rather than his people exterminated.

    I acknowledge I have a difficult position to defend, partly because of Stalin’s antics and partly because I only half-agree with my own position anyway.

    I met some Poles who grew up and lived in the USSR – on retirement they were finally allowed to travel outside the eastern bloc so visited a sister (my neighbour) in England, who they hadn’t seen since the war.

  11. @ bis and JamesV
    Atheist Jews were massively over-represented in the higher levels of Soviet Russia (a major historical treatise “Hitler and Stalin – parallel lives” points out that Hitler did not *need to* invent Jewish-Communist links since a large part of Stalin’s inner circle, including two of his mistresses, were Jewish). On the other hand religious Jews in Russia were persecuted by the Communists and non-atheistic Jews were discriminated against – the Soviet Academy of Sciences was head-quartered in St Petersburg (temporarily renamed Leningrad) with a secondary centre in Novosibirsk, the capital of Siberia; after they extended a small lake nearby to be a large (roughly the size of Lincolnshire) reservoir winter temperatures improved from -50C to -40C – in the 1990s the Novosibirsk faculty had so large a minority of non-political Jews that I had to think hard to realise they were not a majority.

  12. @ JamesV
    Your friends were relatively lucky: one of my schoolfriends was half-Polish – his father was part of the Polish squadron who helped win the Battle of Britain after Chamberlain had failed to protect Poland – and he managed to visit his Polish grandparents in his late twenties but his father could never return and see his parents because he had fought against Nazi Germany while it was allied to Russia.

  13. “He means HE has only just discovered Veblen.”

    So true.

    In fact, just about any economist who hasn’t had his work released in coloring book form remains undiscovered by Ritchie.

  14. Fascism (whether Hitlerian Nazism or Mussolini-style) and Communism, especially the demented variety of Marxism-Leninism that found its apotheosis in Stalin have far more in common with each other than they have apart. The absolute elevation of the State above the individual is the most obvious. The focus on a single Great Helmsman is another; even if Fascism tends towards more of an explicit Fuhrerprinzip than Communism, there’s no denying the iconic status of a Mao or a Pol Pot. There’s the way ideology seeps into every nook and cranny of life – quotidian totalitarianism rather than purges and gulags. There’s no denying the common ancestry of the two, even if they’re cousins rather than siblings. Generally I find if someone is arguing Nazism is not ‘real’ socialism he’s engaging in apologetics.

    As an aside, at the time of his long-overdue death, Stalin was preparing for a further anti-Jewish purge.

  15. I see the only difference between communism and fascism is who owns the businesses. Both have strong, autocratic central control of business.

  16. John77
    A footnote to your 7:26 pm
    I had the ‘pleasure’ of working for the squadron leader of the Polish squadron, in a much earlier life. He was much as described in various memoirs.

  17. Yes, Veblen is ignored so completely in the economics literature that a quick google scholar search finds a 2009 Economic Journal article on Veblen goods…

  18. @ Edward Lud
    I should not have got us into the position where we couldn’t defend Czechoslovakia. More Baldwin’s fault than Chamberlain’s actually – should have started rearming as soon as it became clear that Hitler was a threat.
    In answer to your question attacking Germany from the west, destroying much of the Saar’s industry by bombing and long-range artillery, couldn’t have done any worse than the phoney war followed by the blitzkrieg.

  19. So Much For Subtlety

    David Gillies – “As an aside, at the time of his long-overdue death, Stalin was preparing for a further anti-Jewish purge.”

    Allegedly. Most of the top leadership of the Soviet Communist Party was Jewish. As was a large number of Stalin’s immediate family. Even more so of the Eastern European Communist Parties that Stalin imposed on his conquests. They weren’t all going to get purged. Although a lot of the Eastern Europeans were.

    The Russian Revolution was bad for everyone but it was probably least bad for Russia’s Jews. After all, they did two things – they shot a lot of people in positions of power from before 1918 and they lifted bans on educating Jews. Which means that the people who suddenly rose from poverty to jobs with real power were often Jewish. Stalin purged a lot of people. One threatened purge at the end of his life does not and cannot change the 30 years of government policy before that.

    The Communists hated people who hated Jews – everyone associated with the Tsars, Cossacks and the Orthodox Church. It is natural Jews felt a little bit well disposed to them. Which may well explain the natural reflexive sympathy many Western Jews have had for the USSR. They were over-represented in Western Communist parties after all.

  20. John77, no, it couldn’t. On the other hand, I assume you’re suggesting such a pummeling ought to have commenced after third September. By which time Poland was already toast. And it would have done nothing to slow the Soviet advance from the east.

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