Introduction to political economy critiquies of Capitalism: Thorstein Veblen

INTRODUCTION TO POLITICAL ECONOMY
Critiquies of Capitalism: Thorstein Veblen
Inroduction
1 In today's lecture we'll look at the conributions of Thorestein Veblen
2 One of the most interesting things about Veblen's theory is that it focuses on consmuption
3 Most of the theories we've studied so far study production and the creation of value
BACKGROUND ON VEBLEN:
Thorstein Bunde Veblen was a Norwegian-American economist and sociologist who, during his lifetime, emerged as a well-known critic of capitalism. In his best-known book, The Theory of the Leisure Class, Veblen coined the concepts of conspicuous consumption and conspicuous leisure.
Born: July 30, 1857, Cato, Wisconsin, United States
Died: August 3, 1929, Sand Hill Road, California, United States
Influenced by: John Dewey, Immanuel Kant, Henri de Saint-Simon, William Graham Sumner, William James, more
Spouse: Ann Bradley Bevans (m. 1914–1920), Ellen Rolfe (m. 1888–1911)
Education: Yale University (1884), Carleton College (1880), Johns Hopkins University, Cornell University
Awards: John Addison Porter Prize
VEBLEN'S INTELLECTUAL INFLUENCES:
Veblen was influenced by four major ways of thinking
1 German historical school ( individuals don't really matter, we we need to look at the social patterns and structures)
2 Darvin's theory of evolution ( Everything has couse , there is no divine reason behind the world, therefore there is no equalibrism)
3. Pragmatism ( People have free will and use this free will to shape the society and its culture/institutions)
4. Marxism( Small number of prasitic owners control everything at the expense of productive members of society, texnology can cause social change)
INSTITUTIONAL ECONOMICS

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  Veblen helped to create a way of thinking which is known as Institutional Political Economy or Institutional Economics
  
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  Most economics understand the economy of as static, in equilibrium, and separate from politics and society
  
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  Veblen argued the economy was embedded in our society and saw relationship between social/ cultural institutions and the economy
  
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  If this is true, Veblen suggests it's also impossible to separate economics from the other social sciences
  

CONSPICUOUS CONSUMPTION

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  Veblen invented the term conspicuous consumption to describe the way people buy things to show off how much money and status they have
  
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  He argued that many purchases were not about how useful the item was, equally many people don't use money rationally, opposing the arguments of economics
  
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  The consumer does this to gain, or maintain , social status, and the lower classes try to emulabe them
  
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  A wide variety of behaviours are included here for example
  
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  Luxury goods or services
  
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  Charity and philanteraphy
  
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  Use of leisure time
  
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  The social impact of conspicious consumption : if everyone is trying to show how much money they have , it creabs a society that wastes money and time
  

Conspecious Leisure

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  Leisure (non-work) that displays ones social status
  
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  This would include things like taking a holiday ina fancy place
  
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  Conspicious leisure plays in important role for Veblen as it motivates the lower social classes to want to copy the rich, rather than overthrow them.
  
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  Veblen's theory suggests the value of non-work comes about in an evolutionary way, tradationally the nobility didnot have to do manual labor but the serfs did
  
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  This established a norm where non-work proved how important you are
  
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  The differance here is that the nobility of the past at least did something (government) the leisure class doesn't contribute to society at all
  
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  Showing rules of etiquatte are also included here as they are totally unproductive
  

VEBLEN GOODS

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  Part of Veblen's lasting impact on the analysis of the economy is in concept of "Veblen goods"
  
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  In mainstream economic thinking, a rise in pricemeans lower demand for the good ( as fewer people can purchase it)
  
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  By contrast a Veblen good is commodity which is the price rises, the demand for the good increases due to its luxury status
  
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  An ecample of this is fashionable clothes where many retailers find that increasing the price increases the amount of sales
  
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  The opposite effect is that when prices fall, desirability of the goods falls with it
  

VEBLENIAN DICHTOMY

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  Veblen argued that there's a destinction between "institutions" and "technology" in the way the economy works
  
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  Technology is something instrumental, and its value is determined by our ability to use it to control the future more than we can control our present
  
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  "Institutions" relate to tradational or ceremonial behaviours that have nothing to do with a technological imperative such as :
  
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  Tradational gift giving
  
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  Cereminies such as weddings and funerals
  

CHAPTER XI: LUCK

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  Veblen devotes chapter 11 of his book to the cult of luck
  
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  Gambling is a display of conspicious consumption and of cinspicuous leisure
  
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  Gambling of course is a true zero sum game, no value is created, one side wins the other side loses
  
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  Modern finance os badically gambling, we even refer to "betting" on shares
  

CHAPTER XIV: HIGHER EDUCATION

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  Uhoh...
  
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  Veblen also ciritiqued the role of universities in modern life
  
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  Highlights differance between university and polytechnical education
  
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  At university we learn abstract subjects, wheareas polytechnical colleges teach practical skills
  
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  Universities are considered high prestoge institutions, polytechnical colleges not
  
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  Even though tje skills they teach generate significant value
  
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  Veblen argued many people study degrees just for the status and that ceremonial symbols in universities indicate it is a leisure class institution