The relationship between Karl Marx and Thorstein Veblen has created some controversy between various scholars and schools of economic thought. While some point out the Marxist influences in Veblen’s writings, the general consensus is that “Veblen is not an American Marxist”.

Understanding Thorstein Veblen He believed that limits on production by business to raise profits contributed to problems like unemployment. Veblen’s other major contribution was the development of American institutional economics.

Thorstein Veblen

The Veblenian dichotomy is a concept first suggested by Thorstein Veblen in 1899, in The Theory of the Leisure Class: An Economic Study of Institutions. To Veblen, institutions determine how technologies are used. Some institutions are more “ceremonial” than others.

Veblen wanted to make economics an evolutionary science based on human instincts and institutions. Calling his own method the evolutionary method of economic analysis, he believed that economists—both past and present had completely failed to grasp the significance of the evolutionary approach.

People experience something of this in their own lives as a contrast between the leisure they have and the leisure they wish to have, or between how they actually use their leisure and how it should be used. Leisure is something people both have and aspire to have.

What does Veblen mean by the “leisure class” Veblen considers the leisure class the people wealthy enough to not have to work to live. He explains the relationship between the working class and the leisure of owning things but not having to work.

people who do not have to work

The basis on which good repute in any highly organized industrial community ultimately rests is pecuniary strength; and the means of showing pecuniary strength, and so of gaining or retaining a good name, are leisure and a conspicuous consumption of goods.

According to Veblen, the main cause of conspicuous consumption is mainly the desire for peer recognition and higher social status. Whilst the desire for peer recognition and higher social status are drivers of conspicuous consumption, other factors include social media, consumerism, and economic advancement.

High levels of conspicuous consumption may be seen as socially undesirable on two grounds; firstly, as it is often associated with high relative income, high levels of conspicuous consumption may be an indicator of high levels of income inequality, which may be found intrinsically or instrumentally objectionable; …

For practical purposes, consumption means the spending of money income. Consumption, thus, involves expenditure of income or wealth-using activity of man. Types of Consumption: Consumption is known as direct or final consumption, when the goods satisfy human wants directly and immediately.

Increased consumption. Firstly, higher GDP implies the economy is producing more goods and services and therefore consumers can enjoy more goods and services. Higher levels of consumption will help to reduce any incidence of absolute poverty (when people can’t meet basic necessities of life.)

Consumption represents the process by which goods, services, or ideas are used and transformed into value. The basic consumer behavior process includes steps that begin with consumer needs and finish with value.

An increase of consumption raises GDP by the same amount, other things equal. Moreover, since current income (GDP) is an important determinant of consumption, the increase of income will be followed by a further rise in consumption: a positive feedback loop has been triggered between consumption and income.

Importance in Income and Employment Theory: In modern times, consumption has been given the most important role in the income and employment theory by Keynes. Thus consumption plays an” important role in the determination of income, output and employment in a country.

Consumption plays an important role in the income and employment theory under Keynesian economics as put forth by John Maynard Keynes. Keynesian theory states that if consuming goods and services does not increase the demand for such goods and services, it leads to a fall in production.

Misuse of land and resources. Exporting Pollution and Waste from Rich Countries to Poor Countries. Obesity due to Excessive Consumption. A cycle of waste, disparities and poverty.