Norwegian-American Sociologist and Economist, Leader of the Institutional Economics Movement
Thorstein Veblen, fully Thorstein Bunde Veblen, born Torsten Bunde Veblen
Norwegian-American Sociologist and Economist, Leader of the Institutional Economics Movement
There is probably no cult in which ideals of pecuniary merit have not been called in to supplement the ideals of ceremonial adequacy that guide men's conception of what is right in the matter of sacred apparatus.
Throughout the entire evolution of conspicuous expenditure, whether of goods or of services or human life, runs the obvious implication that in order to effectually mend the consumer's good fame it must be an expenditure of superfluities. In order to be reputable it must be wasteful. No merit would accrue from the consumption of the bare necessaries of life, except by comparison with the abjectly poor who fall short even of the subsistence minimum.
We are yet so little removed from a state of effective slavery as still to be fully sensitive to the sting of any imputation of servility. This antipathy asserts itself even in the case of the liveries or uniforms which some corporations prescribe as the distinctive dress of their employees. In this country the aversion even goes the length of discrediting?in a mild and uncertain way?those government employments, military and civil, which require the wearing of a livery or uniform.
With the growth of settled industry... the possession of wealth gains in relative importance and effectiveness as a customary basis of repute and esteem...not that successful predatory aggression or warlike exploit ceases to call out the approval and admiration of the crowd ...but the opportunities for gaining distinction by means of this direct manifestation of superior force grow less available.
There is... a variation due to adaptation in detail within the range of the type, and to selection between specific habitual views regarding any given social relation or group of relations.
To come to an understanding of the source and origin of this margin of disposable revenue that goes to the earnings of corporate capital, it is necessary to come to an understanding of the industrial system out of which the disposable margin of revenue arises. Productive industry yields a margin of net product over cost, counting cost in terms of man power and material resources; and under the established rule of self-help and free bargaining as it works out in corporation finance, this margin of net product has come to rest upon productive industry as an overhead charge payable to anonymous outsiders who own the corporation securities.
We have, as the great and dominant norm of dress, the broad principle of conspicuous waste. Subsidiary to this principle, and as a corollary under it, we get as a second norm the principle of conspicuous leisure...Beyond these two principles there is a third of scarcely less constraining force...Dress must not only be conspicuously expensive and inconvenient, it must at the same time be up to date...This principle of novelty is another corollary under the law of conspicuous waste...If none of last season's apparel is carried over and made further use of during the present season, the wasteful expenditure on dress is greatly increased...any change in the fashions must conform to the requirement of wastefulness.
With the primitive barbarian... "honorable" seems to connote nothing else than assertion of superior force...The naive, archaic habit of construing all manifestations of force in terms of personality or "will power" greatly fortifies this conventional exaltation of the strong hand...This holds true to an extent also in the more civilized communities of the present day.
There is... relatively little incentive to the exclusive possession and use of these beautiful things, except on the ground of their honorific character as items of conspicuous waste.
To the common man who has taken to reckoning in terms of tangible performance, in terms of man power and material resources, these returns on investment that rest on productive enterprise as an overhead charge are beginning to look like unearned income. Indeed, the same unsympathetic preconception has lately come in for a degree of official recognition. High officials who are presumed to speak with authority, discretion and an unbiased mind have lately spoken of incomes from investments as "unearned incomes," and have even entertained a project for subjecting such incomes to a differential rate of taxation above what should fairly be imposed on "earned incomes," All this may, of course, be nothing more than an unseasonable lapse of circumspection on the part of the officials, who have otherwise, on the whole, consistently lived up to the best traditions of commercial sagacity; and a safe and sane legislature has also canvassed the matter and solemnly disallowed any such invidious distinction between earned and unearned incomes. Still, this passing recognition of unearned incomes is scarcely less significant for being unguarded; and the occurrence lends a certain timeliness to any inquiry into the source and nature of that net product of industry out of which any fixed overhead charges of this kind are drawn.
We might naturally expect that the fashions should show a well-marked trend in the direction of some one or more types of apparel eminently becoming to the human form; and we might even feel that we have substantial ground for the hope that today, after all the ingenuity and effort which have been spent on dress these many years, the fashions should have achieved a relative perfection and a relative stability, closely approximating to a permanently tenable artistic ideal. But such is not the case...the assertion freely goes uncontradicted that styles in vogue two thousand years ago are more becoming than the most elaborate and painstaking constructions of today.
Within the nation the enlightened principles of self-help and free contract have given rise to vested interests which control the industrial system for their own use and thereby come in for a legal right to the community's net output of product over cost. Each of these vested interests habitually aims to take over as much as it can of the lucrative traffic that goes on and to get as much as it can out of the traffic, at the cost of the rest of the community.
There may be truth in the view (as a question of policy) so often expressed by the spokesmen of the conservative element, that without some such substantial and consistent resistance to innovation as is offered by the conservative well-to-do classes, social innovation and experiment would hurry the community into untenable and intolerable situations; the only possible result of which would be discontent and disastrous reaction. All this, however, is beside the present argument.
To the spokesmen of "business as usual" this rating of current production under the pressure of war needs may seem extravagantly low; whereas, to the experts in industrial engineering, who are in the habit of arguing in terms of material cost and mechanical output, it will seem extravagantly high. Publicly, and concessively, this latter class will speak of a 25 percent efficiency; in private and confidentially they appear disposed to say that the rating should be nearer to 10 percent than 25. To avoid any appearance of an ungenerous bias, then, present actual production in these essential industries may be placed at something approaching 50 percent of what should be their normal productive capacity in the absence of a businesslike control looking to "reasonable profits." It is necessary at this point to call to mind that the state of the industrial arts under the new order is highly productive, -- beyond example.
Wealth has by no means yet lost its utility as a honorific evidence of the owner's prepotence.
Without reflection or analysis, we feel that what is inexpensive is unworthy. "A cheap coat makes a cheap man."
Therefore the economic situation which so underlay and conditioned this modern point of view at the period when it was given its stable form becomes the necessary point of departure for any argument bearing on the changes that have been going forward since then, or on any prospective reconstruction that may be due to follow from these changed conditions in the calculable future. At this head, the students of history are in a singularly fortunate position. The whole case is set forth in the works of Adam Smith, with a comprehension and lucidity which no longer calls for praise. Beyond all other men Adam Smith is the approved and faithful spokesman of this modern point of view in all that concerns the economic situation which it assumes as its material ground; and his description of the state of civilized society, trade and industry, as he saw it in his time and as he wished it to stand over into the future, is to be taken without abatement as a competent exposition of those material conditions which were then conceived to underlie civilized society and to dictate the only sound reconstruction of civil and economic institutions according to the modern plan. Yet the Industrial Revolution does not lie within Adam Smith's "historical present," nor does his system of economic doctrines make provision for any of its peculiar issues. What he has to say on the mechanics of industry is conceived in terms derived from an older order of things than that machine industry which was beginning to get under way in his own life-time; and all his illustrative instances and arguments on trade and industry are also such as would apply to the state of things that was passing, but they are not drawn with any view to that new order which was then coming on in the world of business enterprise.
To this "natural" plan of free workmanship and free trade all restraint or retardation by collusion among business men was wholly obnoxious, and all collusive control of industry or of the market was accordingly execrated as unnatural and subversive. It is true, there were even then some appreciable beginnings of coercion and retardation -- lowering of wages and limitation of output -- by collusion between owners and employers who should by nature have been competitive producers of an unrestrained output of goods and services according to the principles of that modern point of view which animated Adam Smith and his generation; but coercion and unearned gain by a combination of ownership, of the now familiar corporate type, was virtually unknown in his time. So Adam Smith saw and denounced the dangers of unfair combination between "masters" for the exploitation of their workmen, but the modern use of credit and corporation finance for the collective control of the labor market and the goods market of course does not come within his horizon and does not engage his attention.
What is not doubtful, in the steel business or in any of the other industrial enterprises that run on a similar scale and a similar level of technology, is that the owners of the corporate capital have come in for a very substantial body of intangible assets of this kind, and that these assets of capitalized free income will foot up to several times the total value of the material assets which underlie them.
Women have been required not only to afford evidence of a life of leisure, but even to disable themselves for useful activity...the high heel, the skirt, the impracticable bonnet, the corset... are so many items of evidence to the effect that... the woman is still, in theory, the economic dependent of the man?that, perhaps in a highly idealized sense, she still is the man's chattel. The homely reason for all this conspicuous leisure and attire on the part of women lies in the fact that they are servants to whom, in the differentiation of economic functions, has been delegated the office of putting in evidence their master's ability to pay.
These ethnic types differ in temperament in a way somewhat similar to the difference between the predatory and the ante-predatory variants of the types; the dolicho-blond type showing more of the characteristics of the predatory temperament?or at least more of the violent disposition?than the brachycephalic-brunette type, and especially more than the Mediterranean.
Today (October, 1918) -- it is to be admitted with such emotion as may come to hand -- this question is one which can be entertained quite seriously, in the light of experience. In the recent past, as matters have stood up to the outbreak of the war, the ordinary rate of production in the essential industries under businesslike management has habitually and by deliberate contrivance fallen greatly short of productive capacity. This is an article of information which the experience of the war has shifted from the rubric of "Interesting if True" to that of "Common Notoriety."
Whatever approves itself to us on any ground at the outset, presently comes to appeal to us as a gratifying thing in itself; it comes to rest in our habits of thought as substantially right.
These indices and others which resemble them in point of the boldness with which they point out to all observers the habitual uselessness of those persons who employ them, have been replaced by other, more dedicate methods of expressing the same fact; methods which are no less evident to the trained eyes of that smaller, select circle whose good opinion is chiefly sought...As the community advances in wealth and culture, the ability to pay is put in evidence by means which require a progressively nicer discrimination in the beholder. This nicer discrimination between advertising media is in fact a very large element of the higher pecuniary culture.
Trained service has utility, not only as gratifying the master's instinctive liking for good and skillful workmanship and his propensity for conspicuous dominance over those whose lives are subservient to his own, but it has utility also as putting in evidence a much larger consumption of human service than would be shown by the mere present conspicuous leisure performed by an untrained person.