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In sociology and in economics, the term conspicuous consumption describes and explains the consumer practice of buying and using goods of a higher quality, price, or in greater quantity than practical.The sociologist Thorstein Veblen coined the term conspicuous consumption to explain the spending of money on and the acquiring of luxury commodities (goods and services) specifically as a public display of economic power — the income and the accumulated wealth of the buyer. To the conspicuous consumer, the public display of discretionary income is an economic means of either attaining or of maintaining a given social status.
The development of Veblen's sociology of conspicuous consumption also identified and described other economic behaviours such as invidious consumption, which is the ostentatious consumption of goods, an action meant to provoke the envy of other people; and conspicuous compassion, the ostentatious use of charity meant to enhance the reputation and social prestige of the donor;thus the socio-economic practises of consumerism derive from conspicuous consumption.
In The Theory of the Leisure Class: An Economic Study in the Evolution of Institutions (1899), Thorstein Veblen identified, described, and explained the behavioural characteristics of the nouveau riche (new rich) social class that emerged from capital accumulation during the Second Industrial Revolution (1860–1914).In that 19th-century social and historical context, the term "conspicuous consumption" applied narrowly in association with the men, women, and families of the upper class who applied their great wealth as a means of publicly manifesting their social power and prestige, either real or perceived. The strength of one's reputation is in direct relationship to the amount of money possessed and displayed; that is to say, the basis "of gaining and retaining a good name, are leisure and conspicuous consumption."
In the 1920s, economists such as Paul Nystrom proposed that changes in lifestyle as result of the industrial age led to massive expansion of the "pecuniary emulation."That conspicuous consumption had induced in the mass of society a "philosophy of futility" that would increase the consumption of goods and services as a social fashion; consumption for the sake of consumption.
In 1949, James Duesenberry proposed the "demonstration effect" and the "bandwagon effect", whereby a person's conspicuous consumption psychologically depends upon the actual level of spending, but also depends upon the degree of his or her spending, when compared with and to the spending of other people. That the conspicuous consumer is motivated by the importance, to him or to her, of the opinion of the social and economic reference groups for whom he or she are performed the conspicuous consumption.
Veblen said that conspicuous consumption comprised socio-economic behaviours practised by rich people as activities usual and exclusive to people with much disposable income;yet a variation of Veblen's theory is presented in the conspicuous consumption behaviours that are very common to the middle class and to the working class, regardless of the person's race and ethnic group. Such upper-class economic behaviour is especially common in societies with emerging economies in which the conspicuous consumption of goods and services ostentatiously signals that the buyer rose from poverty and has something to prove to society.
In The Millionaire Next Door: The Surprising Secrets of America's Wealthy (1996), Thomas J. Stanley and William D. Danko reported conspicuous frugality, another variation of Veblen's social-class relation to conspicuous consumption. That Americans with a net worth of more than a million dollars usually avoid conspicuous consumption, and tend to practise frugality, such as paying cash for a used car rather using credit, in order to avoid material depreciation and paying interest upon a car loan.
Since the 19th century, conspicuous consumption explains the psychology behind the economics of a consumer society, and the increase in the types of goods and services that people consider necessary to and for their lives in a developed economy. Supporting interpretations and explanations of contemporary conspicuous consumption are presented in Consumer Culture (1996) by Celia Lury,Consumer Culture and Modernity (1997) by Don Slater, Symbolic Exchange and Death (1998) by Jean Baudrillard, and Spent: Sex, Evolution, and the Secrets of Consumerism (2009) by Geoffrey Miller.
Moreover, D. Hebdige, in Hiding in the Light (1994), proposes that conspicuous consumption is a form of displaying a personal identity,and a consequent function of advertising, as proposed in Ads, Fads, and Consumer Culture (2000), by A. A. Berger. Each variant interpretation and complementary explanation is derived from Veblen's original sociologic proposition in The Theory of the Leisure Class: that conspicuous consumption is a psychological end in itself, from which the practitioner (man, woman, family) derived the honour of superior social status.
In An Examination of Materialism, Conspicuous Consumption and Gender Differences (2013), the researchers Brenda Segal and Jeffrey S. Podoshen reported great differences in the consumerism practised by men and women. The data about materialism and impulse purchases of 1,180 Americans indicate that men have greater scores for materialism and conspicuous consumption; and that women tended to buy goods and services on impulse; and both sexes were equally loyal to a given brand of goods and services.
The term conspicuous consumption denotes the act of buying something, especially something expensive, that is not necessary to one's life, in a noticeable way.Scholar Andrew Trigg (2001) defined conspicuous consumption as behaviour by which one can display great wealth, by means of idleness—expending much time in the practice of leisure activities, and spending much money to consume luxury goods and services.
Conspicuous compassion, the practice of publicly donating large sums of money to charity to enhance the social prestige of the donor, is sometimes described as a type of conspicuous consumption.This behaviour has long been recognised and sometimes attacked—for example, the New Testament story Lesson of the widow's mite criticises wealthy people who make large donations ostentatiously, while praising poorer people who make small but comparatively more difficult donations in private.
Possible motivations for conspicuous consumption include:
Oversized houses facilitated other forms of conspicuous consumption, such as an oversized garage for the family's oversized motor vehicles or buying more clothing to fill larger clothes closets. Conspicuous consumption becomes a self-generating cycle of spending money for the sake of social prestige. Analogous to the consumer trend for oversized houses is the trend towards buying oversized light trucks, specifically the off-road sport utility vehicle type (cf. station wagon/estate car), as a form of psychologically comforting conspicuous consumption, because such large vehicles usually are bought by city-dwellers, an urban nuclear family.
Conspicuous consumption is exemplified by purchasing goods that are exclusively designed to serve as symbols of wealth, such as luxury-brand clothing, high-tech tools, and vehicles.
Materialistic consumers are likely to engage in conspicuous luxury consumption.The global yearly revenue of the luxury fashion industry was €1.64 trillion in 2019. Buying of conspicuous goods is likely to be influenced by the spending habits of others. This view of luxury conspicuous consumption is being incorporated into social media platforms which is impacting consumer behaviour.
The journalist H. L. Mencken addressed the sociological and psychological particulars of the socio-economic behaviours that are conspicuous consumption, by asking:
Do I enjoy a decent bath because I know that John Smith cannot afford one — or because I delight in being clean? Do I admire Beethoven's Fifth Symphony because it is incomprehensible to Congressmen and Methodists — or because I genuinely love music? Do I prefer terrapin à la Maryland to fried liver because plowhands must put up with the liver — or because the terrapin is intrinsically a more charming dose? Do I prefer kissing a pretty girl to kissing a charwoman, because even a janitor may kiss a charwoman — or because the pretty girl looks better, smells better, and kisses better?
In The Theory of the Leisure Class (1899) Veblen said that “among the motives which lead men to accumulate wealth, the primacy, both in scope and intensity, therefore, continues to belong to this motive of pecuniary emulation” of the rich.In the study “Borrowing to Keep Up (with the Joneses): Inequality, Debt, and Conspicuous Consumption” (2020), Sheheryar Banuri and Ha Nguyen reported three findings:
The findings that Banuri and Nguyen reported indicate that the cyclical effect of borrowing money for conspicuous consumption leads to and perpetuates economic inequality. That poor people imitate, try to match, and emulate the consumption patterns of rich people in order to increase their social status, and perhaps rise in society. That such socio-economic behaviours, facilitated by easy access to credit, generate macroeconomic volatility and support Veblen's concept of pecuniary emulation used to finance a person's social standing.
In the case of conspicuous consumption, taxes upon luxury goods diminish societal expenditures on high-status goods, by rendering them more expensive than non-positional goods. In this sense, luxury taxes can be seen as a market failure correcting Pigovian tax—with an apparent negative deadweight loss, these taxes are a more efficient mechanism for increasing revenue than 'distorting' labour or capital taxes.A luxury tax applied to goods and services for conspicuous consumption is a type of progressive sales tax that at least partially corrects the negative externality associated with the conspicuous consumption of positional goods. In Utility from Accumulation (2009), Louis Kaplow said that assets exercise an objective social-utility function, i.e. the rich man and the rich woman hoard material assets, because the hoard, itself, functions as status goods that establish his and her socio-economic position within society. When utility is derived directly from accumulation of assets, this lowers the dead weight loss associated with inheritance taxes and raises the optimal rate of inheritance taxation.
In place of luxury taxes, economist Robert H. Frank proposed the application of a progressive consumption tax; in a 1998 New York Times article, John Tierney said that as a remedy for the social and psychological malaise that is conspicuous consumption, the personal income tax should be replaced with a progressive tax upon the yearly sum of discretionary income spent on the conspicuous consumption of goods and services.Another option is the redistribution of wealth, either by means of an incomes policy – for example the conscious efforts to promote wage compression under variants of social corporatism such as the Rehn–Meidner model and/or by some mix of progressive taxation and transfer policies, and provision of public goods. When individuals are concerned with their relative income or consumption in comparison to their peers, the optimal degree of public good provision and of progression of the tax system is raised. Because the activity of conspicuous consumption, itself, is a form of superior good, diminishing the income inequality of the income distribution by way of an egalitarian policy reduces the conspicuous consumption of positional goods and services. In Wealth and Welfare (1912), the economist A. C. Pigou said that the redistribution of wealth might lead to great gains in social welfare:
Now the part played by comparative, as distinguished from absolute, income is likely to be small for incomes that only suffice to provide the necessaries and primary comforts of life, but to be large with large incomes. In other words, a larger proportion of the satisfaction yielded by the incomes of rich people comes from their relative, rather than from their absolute, amount. This part of it will not be destroyed if the incomes of all rich people are diminished together. The loss of economic welfare suffered by the rich when command over resources is transferred from them to the poor will, therefore, be substantially smaller relatively to the gain of economic welfare to the poor than a consideration of the law of diminishing utility taken by itself suggests.
The economic case for the taxation of positional, luxury goods has a long history; in the mid-19th century, in Principles of Political Economy with some of their Applications to Social Philosophy (1848), John Stuart Mill said:
I disclaim all asceticism, and by no means wish to see discouraged, either by law or opinion, any indulgence which is sought from a genuine inclination for, any enjoyment of, the thing itself; but a great portion of the expenses of the higher and middle classes in most countries ... is not incurred for the sake of the pleasure afforded by the things on which the money is spent, but from regard to opinion, and an idea that certain expenses are expected from them, as an appendage of station; and I cannot but think that expenditure of this sort is a most desirable subject of taxation. If taxation discourages it, some good is done, and if not, no harm; for in so far as taxes are levied on things which are desired and possessed from motives of this description, nobody is the worse for them. When a thing is bought not for its use but for its costliness, cheapness is no recommendation.
"Conspicuous non consumption" is a phrase used to describe a conscious choice to opt out of consumption with the intention of sending deliberate social signals.
Thorstein Bunde Veblen was a Norwegian-American economist and sociologist who, during his lifetime, emerged as a well-known critic of capitalism.
Consumerism is a social and economic order that encourages the acquisition of goods and services in ever-increasing amounts. With the industrial revolution, but particularly in the 20th century, mass production led to overproduction—the supply of goods would grow beyond consumer demand, and so manufacturers turned to planned obsolescence and advertising to manipulate consumer spending. In 1899, a book on consumerism published by Thorstein Veblen, called The Theory of the Leisure Class, examined the widespread values and economic institutions emerging along with the widespread "leisure time" in the beginning of the 20th century. In it, Veblen "views the activities and spending habits of this leisure class in terms of conspicuous and vicarious consumption and waste. Both are related to the display of status and not to functionality or usefulness."
In economics and consumer theory, a Giffen good is a product that people consume more of as the price rises and vice versa—violating the basic law of demand in microeconomics. For any other sort of good, as the price of the good rises, the substitution effect makes consumers purchase less of it, and more of substitute goods; for most goods, the income effect reinforces this decline in demand for the good. But a Giffen good is so strongly an inferior good in the minds of consumers that this contrary income effect more than offsets the substitution effect, and the net effect of the good's price rise is to increase demand for it. Also known as Giffen paradox. A Giffen good is considered to be the opposite of an ordinary good.
In economics, a normal good is a type of a good which experiences an increase in demand due to an increase in income. When there is an increase in a person's income, for example due to a wage rise, a good for which the demand rises due to the wage increase, is referred as a normal good. Conversely, the demand for normal goods declines when the income decreases, for example due to a wage decrease or layoffs.
A Veblen good is a type of luxury good for which the demand for a good increases as the price increases, in apparent contradiction of the law of demand, resulting in an upward-sloping demand curve. The higher prices of Veblen goods may make them desirable as a status symbol in the practices of conspicuous consumption and conspicuous leisure. A product may be a Veblen good because it is a positional good, something few others can own.
In microeconomics, an Engel curve describes how household expenditure on a particular good or service varies with household income. There are two varieties of Engel curves. Budget share Engel curves describe how the proportion of household income spent on a good varies with income. Alternatively, Engel curves can also describe how real expenditure varies with household income. They are named after the German statistician Ernst Engel (1821–1896), who was the first to investigate this relationship between goods expenditure and income systematically in 1857. The best-known single result from the article is Engel's law which states that as income grows, spending on food becomes a smaller share of income; therefore, the share of a household's or country's income spent on food is an indication of their affluence.
The Theory of the Leisure Class: An Economic Study of Institutions (1899), by Thorstein Veblen, is a treatise of economics and social critique of conspicuous consumption as a function of social class and of consumerism, which are social activities derived from the social stratification of people and the division of labor; the social institutions of the feudal period that have continued to the modern era.
Consumption, defined as spending for acquisition of utility, is a major concept in economics and is also studied in many other social sciences. It is seen in contrast to investing, which is spending for acquisition of future income.
In microeconomics, the law of demand is a fundamental principle which states that there is an inverse relationship between price and quantity demanded. In other words, "conditional on all else being equal, as the price of a good increases (↑), quantity demanded will decrease (↓); conversely, as the price of a good decreases (↓), quantity demanded will increase (↑)". Alfred Marshall worded this as: "When then we say that a person's demand for anything increases, we mean that he will buy more of it than he would before at the same price, and that he will buy as much of it as before at a higher price". The law of demand, however, only makes a qualitative statement in the sense that it describes the direction of change in the amount of quantity demanded but not the magnitude of change.
The trickle-down effect is a model of product adoption in marketing that affects many consumer goods and services.
In economics, a luxury good is a good for which demand increases more than what is proportional as income rises, so that expenditures on the good become a greater proportion of overall spending.
In sociology, taste or palate is an individual or a demographic group's subjective preferences of dietary, design, cultural and/or aesthetic patterns. Taste manifests socially via distinctions in consumer choices such as delicacies/beverages, fashions, music, etiquettes, goods, styles of artwork, and other related cultural activities. The social inquiry of taste is about the arbitrary human ability to judge what is considered beautiful, good, proper and valuable.
Positional goods are goods valued only by how they are distributed among the population, not by how many of them there are available in total. The source of greater worth of positional goods is their desirability as a status symbol, which usually results in them greatly exceeding the value of comparable goods.
Conspicuous leisure is a concept introduced by the American economist and sociologist Thorstein Veblen, in The Theory of the Leisure Class (1899). Conspicuous or visible leisure is engaged in for the sake of displaying and attaining social status.
Anti-consumerism is a sociopolitical ideology that is opposed to consumerism, the continual buying and consuming of material possessions. Anti-consumerism is concerned with the private actions of business corporations in pursuit of financial and economic goals at the expense of the public welfare, especially in matters of environmental protection, social stratification, and ethics in the governing of a society. In politics, anti-consumerism overlaps with environmental activism, anti-globalization, and animal-rights activism; moreover, a conceptual variation of anti-consumerism is post-consumerism, living in a material way that transcends consumerism.
The Theory of Business Enterprise is an economics book by Thorstein Veblen, published in 1904, that looks at the growing corporate domination of culture and the economy.
Optimal tax theory or the theory of optimal taxation is the study of designing and implementing a tax that maximises a social welfare function subject to economic constraints. The social welfare function used is typically a function of individuals' utilities, most commonly some form of utilitarian function, so the tax system is chosen to maximise the aggregate of individual utilities. Tax revenue is required to fund the provision of public goods and other government services, as well as for redistribution from rich to poor individuals. However, most taxes distort individual behavior, because the activity that is taxed becomes relatively less desirable; for instance, taxes on labour income reduce the incentive to work. The optimization problem involves minimizing the distortions caused by taxation, while achieving desired levels of redistribution and revenue. Some taxes are thought to be less distorting, such as lump-sum taxes and Pigouvian taxes, where the market consumption of a good is inefficient and a tax brings consumption closer to the efficient level.
The consumer revolution refers to the period from approximately 1600 to 1750 in England in which there was a marked increase in the consumption and variety of luxury goods and products by individuals from different economic and social backgrounds. The consumer revolution marked a departure from the traditional mode of life that was dominated by frugality and scarcity to one of increasingly mass consumption in society.
Conspicuous conservation is a term which describes consumer behavior, in which consumers purchase environmentally friendly products in order to signal a higher social status.
Guilt-free consumption (GFC) is a pattern of consumption based on the minimization of the sense of guilt which consumers incur when purchasing products or commercial services.
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