Conspicuous Consumption

Thorstein Veblen coined the term conspicuous consumption around the turn of the 20th century. If you have ever wondered why someone drives a Cadillac when a Hyundai will get you where you want to go, then you understand the basic concept of conspicuous consumption. Any make of car may get you to your destination, but driving a Cadillac will get you noticed by others. Economists postulate that consumers derive “utility” from the consumption of goods. Veblen would say that this utility comes from two distinct characteristics of goods. The first is what he called the serviceability of the good. This basically means that the good gets the job done. Both the Cadillac and the Hyundai will get you from New York to Boston. The other characteristic of a good is what Veblen called its honorific aspect. Driving a Cadillac provides evidence that you can afford to drive a car that others will admire not primarily because it gets the job done, but rather because it provides visible evidence you have enough wealth to own a Cadillac. The Cadillac is thus an outward display of your status in society. Barbarian societies might display gold captured from enemies as evidence of prowess in warfare. In modern society, people drive Cadillacs.

A corollary of these dual characteristics of goods is that such conspicuous consumption is waste. In using this term, Veblen is not making a judgment that the good is unneeded by society, but rather uses waste as a technical term indicating that the production of a Cadillac requires more resources than the production of an Hyundai. A Cadillac may have leather seats; a Hyundai has vinyl seats. The difference Veblen would label waste, but this does not mean that Cadillacs should not be produced.

The core of Veblen's analysis of modern society was the fact that, on the one hand, there is enormous technological potential to produce goods. On the other hand, business enterprise constrains the amount produced to that which can be profitably sold. One way to think of this is that if all one needed to do is get from New York to Boston, then that could be satisfied by Hyundais. To sell more cars, wants must be continually expanded. In Veblen's view, the function of advertising was to ensure that people want a Cadillac. The gulf between the wants of consumers and the technological potential is reduced through advertising. It is for this reason that Veblen viewed advertising as [Page 416]waste, but one that is intrinsic to a modern economy based on the principles of profit-making business enterprises.

An important point in Veblen's analysis is the recognition that all goods have elements of serviceability and waste. The typical textbook example of conspicuous consumption cites fur coats, diamonds, or expensive cars. These are examples everyone would recognize. However, the dichotomy that Veblen draws between the “honorific” aspects of a good and those that further the “life process” implies that all goods possess these dual characteristics. This means that both the Hyundai and the Cadillac have both serviceable and honorific elements. The fact that one drives a car implies that you are wealthy enough that you do not have to take public transportation, but the Cadillac conveys still higher status in society because you do not have to take public transportation or drive a Hyundai.

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