Conspicuous consumption

History and evolution of the term

The term conspicuous consumption was introduced by American economist and sociologist Thorstein Veblen in his 1899 book The Theory of the Leisure Class. Veblen used the term to depict the behavioral characteristic of the nouveau riche, a new class that emerged in the 19th century capitalistic society as a result of the accumulation of wealth during the Second Industrial Revolution. In this context, the application of the term should be narrowed only to the elements of the upper class who use their enormous wealth to manifest their social power, whether real or perceived. In its original meaning, the term can be easily applied to the nouveau riche that rise due to rapid development of the emerging economies such as Brazil, China, India and Russia. The term can also be applied to ancient times, such as the creation of the Egyptian Pyramids. To some extent, it can be used to describe the spending patterns of corporate managers who support their lavish lifestyles at the expense of the shareholders of the companies they manage (List of corporate executives charged with crimes).

With significant improvement of living standards and the emergence of the middle class in the 20th century, the term conspicuous consumption is now broadly applied to individuals and households with expendable income whose consumption patterns are prompted by zero-sum status seeking rather than being justified by their substantial needs and are thereby socially wasteful. Thus, the concept of conspicuous consumption has been discussed since the 1960s in the context of addictive or narcissistic behaviors induced by consumerism, the desire for immediate gratification, and hedonic expectations among the population.

In recent years, conspicuous consumption has also been viewed as a contributing factor to behavioral disorders such as binge eating and compulsive spending and is a major contributor to personal bankruptcies resulting from abuse and mismanagement of credit[citation needed]. A slang term for conspicuous consumption is bling.

Social and economic effects

Since socio-economic status (the socially-created effects of wealth or income) is a positional good which is in fixed supply, any conspicuous consumption generates negative externalities. In fact, conspicuous consumption may be seen as the in-kind scarcity rent of socio-economic status. Minimizing economic inefficiency by capturing this rent and curbing wasteful consumption is an important argument for luxury taxes and other corrective policies.

Examples of conspicuous consumption

* Possessing objects that imply great purchase cost and cost of maintenance (such as prestige vehicles, expensive jewelry and clothing, excessively large houses, large swimming pools, etc).

* Buying the latest goods to prove affinity to current fads.

* Trophy wives

* Membership in expensive country clubs or other organizations despite hardships.

* Wearing very expensive jewelry.

* Attending an expensive school for the sake of the school's perceived social status rather than its academic value.

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