Thorstein Veblen – Economics Made Interesting

My mom just sent me a book from my grandfather’s library; that would be Charles K. Dickson, a guy who, as I have mentioned, really knew how to be a grandfather. It’s an incredibly interesting book (The Wordly Philosophers by Robert L. Heilbronner) about — economics.

I know, I know, economics is terminally boring. but there’s one guy who makes it interesting — Thorstein Veblen.

Most economists assume that people make economic decisions based on rational self-interest. This is a philosophical cornerstone of the “free market” mentality, an assumption that those who provide for society’s needs will benefit and continue to serve this function. It’s a pathetically simplistic model, still used today.

Did you ever notice that this is actually completely untrue? That the people who supply what people need, like farmers, don’t make diddly, but that the people who make what people do not need, like plastic vomit, make millions?

And — as everyone knows — companies that pay off the Bush administration can make billions.

Anyway, if you want a model that’s a much better fit for collective human economic behavior, try Thorstein Veblen. He is incisive, he is evocative, and he doesn’t give a rat’s ass if you understand or believe anything he says.

That’s what has convinced me, and what has convinced many other readers, that this guy is the genuine article. He’s completely disinterested and he has a prodigious, acquistive mind, as well as the ability to put it all together in a way that no other human that I know of could ever do.

Veblen’s model is based on the fundamental distinction, in primitive societies, between “man’s work” and “women’s work.” Men deal with animate objects — enemies, wild beasts, and sporting opponents. Women deal with inamimate objects. The man kills the bear; the woman chews the hide, cooks the meat, makes the claws into a necklace.

A pair of high heels or a tuxedo are a way of showing the world that you do not have to do useful work.

Veblen is famous for the “Theory of the Leisure Class” and the “Theory of Conspicuous Consumption.” I might try some bite-sized insights from these books in future blogs, but I urge you to check them out for yourself. You’ll see why they are impossible to summarize.

Economic decisions are based, not on rational self-interest, but on ancient, irrational, tribal notions that place one group of people above another.

The “Theory of Conspicuous Consumption” actually assumes that rich people, once they have everything that could possibly amuse them, spend money to convince other people that they are having more fun than they actually are. Is that possible, think you? If yes, you’re a potential Veblen fan.

Not only that, but Veblen identifies the entrepreneur as a saboteur in the economic system, one who makes no money if everything operates as it ought to, one who exploits disruptions in the system for short-term gain, someone who has no interest whatever in the wellbeing of society.

That’s enough for now, but expect more on Thorstein Veblen, the wildman of economics.