Thorstein Veblen

Thordtein Veblen (1857-1929) was an American economist famous in the History of modern economic thought for combining a Darwinian evolutionary perspective with his new institutionalist approach to economic analysis. He combined sociology with economics in his masterpiece, The Theory of the Leisure Class (1899), arguing there was a basic distinction between the productiveness of "industry," which manufactures goods, and the parasitism of "business," which exists only to make profits for a leisure class. The chief activity of the leisure class was "conspicuous consumption," and their economic contribution is "waste," activity that contributes nothing to productivity. Veblen believed that technological advances were the driving force behind cultural change, but, unlike many contemporaries, he refused to connect change with progress. Veblen's sweeping attack on production for profit and its relation to status in society greatly influenced liberal thinkers seeking a non-Marxist critique of capitalism. Experts complained his ideas, while brilliantly presented, were crude, gross, fuzzy, and imprecise; others complained he was a wacky eccentric, a womanizer, and a lecher.

Early career

Veblen was born on July 30, 1857, in Cato, Wisconsin, to Thomas and Kari Veblen. They were farmers who emigrated from Norway in 1847. He attended Carleton College Academy (now Carleton College) in Northfield, Minnesota. He taught a year at a Lutheran academy, then attended Yale University, taking a PhD in philosophy in 1884, with a dissertation on "Ethical Grounds of a Doctrine of Retribution." He was a student in the seminar of William Graham Sumner. Veblen married Ellen Rolfe in 1888; it was a hateful marriage that finally ended in divorce in 1911.

In 1891 he finally obtained his first academic appointment at the new University of Chicago, which overnight became a world class university in many fields. He was promoted to assistant professor in 1900 and edited the prestigious Journal of Political Economy, while conversing with such intellectuals as John Dewey, Jane Addams and Franz Boas. He published two of his best known books, The Theory of the Leisure Class (1899), and The Theory of Business Enterprise (1904).

Later career

A difficult colleague to get along with, in 1906 Veblen went to Stanford University and in 1910 to the University of Missouri. He published The Instinct of Workmanship (1914), Imperial Germany and the Industrial Revolution (1915), and An Inquiry into the Nature of Peace and the Terms of its Perpetuation (1917). In 1918 he served with Herbvert Hoover's Food Administration, and published The Higher Learning in America, a scathing critique of business' influences upon universities. Veblen assailed the porous boundaries between academia and business and condemned university intrusion into faculty privacy. Trapped in a loveless marriage to his first wife, Ellen, who refused him a divorce, Veblen himself crossed boundaries by having affairs, which ultimately led to his dismissal from both the University of Chicago and Stanford University when Ellen went public with the affairs. Veblen transformed this invasion of his privacy into an exposé of the research university. His overstepping of boundaries and the conspicuous interventions of his spouse provided the raw material for one of the most perceptive analyses of the modern university, ironically proving, contrary to what Veblen believed, that personal experience can provide powerful generalizations.

In 1918 and 1919 Veblen published essays and editorials in a radical weekly, The Dial, reprinted in The Vested Interests and the Common Man (1919) and The Engineers and the Price System (1921). From 1920 to 1922 he taught at the New School for Social Research in New York, and in 1923 he published his last major work, Absentee Ownership. He spent his retirement in a cabin in the California hills.

Contributions to Economics

Veblen was an early exponent of institutionalism--the approach to economics that places prime emphasis on historically specific patterns of social behavior, or institutions. Thus, in The Theory of the Leisure Class, he contended that under the unequal social structure created by capitalism, consumer behavior was not based, as neoclassical theory assumed, from atomistically individual valuations of available goods ranked in terms of the "utility" to be derived from their consumption. Rather, he argued that the wealthy, (the "leisure class") were primarily motivated by the drive to flaunt their privileged status through "conspicuous consumption" and "conspicuous waste." The valuations thus established, filtered down to the middle class and the working class through imitation.

Veblen's fundamental criticism of what he called the "received economics" was that it concerned itself only with the commercial side of the modern economy and neglected its industrial and technological foundation. Arguing that monopolistic control of production greatly reduced output, he foresaw the possibility of enormous increases in production when unused resources were set to work. Believing that an artificial inflation of values was characteristic of American capitalism, he predicted a collapse similar to that which occurred in 1929.

Veblen developed two theories of wealth generation. His narrow theory was based on the industry-business dichotomy and the instincts of workmanship and pecuniary interests, while the general theory was based on a theory of positive versus negative instincts or influences. In his general theory, the positive instincts include workmanship, parental ability, and idle curiosity, which promote community and social wealth or welfare. The negative instincts or influences of pecuniary interests, emulation, and predation, on the other hand, destroy aspects of the cultural fabric and promote individualism. When the negative influences dominate over the positive instincts, the economy is disembedded in the sense that there is a high likelihood of depression, stock market crashes, and social dislocation. When the positive instincts dominate the negative ones, socioeconomic progress is in order, and the community is developing in a communicative and integrative fashion. And when there is some degree of relative balance between the two instincts or interests, a moderate degree of social development is in process.

In Veblen's worldview, both private property and the nation-state were institutions that not only obstructed technological advance but in modern times also threatened mankind with reversion to a second Dark Ages. Veblen was a socialist in believing that a modern industrial economy requires unified, public control. But his skepticism of political authority made him something of an anarchist as well. Indeed, he considered that human nature had been biologically fixed in small quasianarchistic cooperative communities.

Veblen's influence was due partly to his inimitable literary style. He made such phrases as "conspicuous consumption" and "cultural lag" a part of the common vocabulary. Wesley Clair Mitchell, Walton Hamilton, and Stuart Chase were among the economists who considered themselves Veblen's disciples. His influence reached its peak during the New Deal, through such policy makers as Rexford Guy Tugwell and Jerome Frank. His witty critiques of capitalism later inspired John Kenneth Galbraith.

Bibliography

• Brette, Olivier. "Thorstein Veblen's Theory of Institutional Change: Beyond Technological Determinism. European Journal of the History of Economic Thought 2003 10(3): 455-477. Issn: 0967-2567 Fulltext: [[[Ebsco]]
• Diggins, John Patrick. Thorstein Veblen (1999) excerpt and text search
• Diggins, John Patrick. The Bard of Savagery: Thorstein Veblen and Modern Social Theory. (1978),
• Dorfman, Joseph. Thorstein Veblen and His America (1934), the standard biography, though it exaggerates Veblen's isolation
• Edgell, Stephen. Veblen in Perspective: His Life and Thought. M. E. Sharpe, 2001. 207 pp.
• Hodgson, Geoffrey M. "On the Evolution of Thorstein Veblen's Evolutionary Economics." Cambridge Journal of Economics 1998 Vol. 22 Issue 4, pp. 415-432
• Knoedler, Janet and Mayhew, Anne. "Thorstein Veblen and the Engineers: a Reinterpretation." History of Political Economy 1999 31(2): 255-272. Issn: 0018-2702
• Maynard, Raymond Anthony. "Thorstein Veblen on Culture, Biology, and Evolution." PhD dissertation U. of Tennessee 2000. 290 pp. DAI 2000 61(6A): 2407-A. DA9973476 Fulltext: ProQuest Dissertations & Theses
• Shannon, Christopher Conspicuous Criticism: Tradition, the Individual and Culture in American Social Thought, from Veblen to Mills (1996)
• Thomas, Marty Jean. "Thorstein Veblen's Theory of Leisure as Interpreted by Veblen Scholars." PhD dissertation Pennsylvania State U. 1999. 183 pp. DAI 2000 61(1): 393-A. DA9960667 Fulltext: ProQuest Dissertations & Theses
• Yonay, Yuval P. The Struggle over the Soul of Economics: Institutionalist and Neoclassical Economists in America Between the Wars. Princeton U. Press, 1998. 290 pp.

By Veblen

• The Theory of the Leisure Class: A Theory of Institutions excerpt and text search ; online edition complete
• The Theory of Business Enterprise excerpt and text search
• The Engineers and the Price System excerpt and text search
• The Higher Learning in America excerpt and text search, complete text online
• Imperial Germany and the Industrial Revolution (1918) online edition
• The Instinct of Workmanship: And the State of the Industrial Arts (1922) complete text online
• What Veblen Taught: Selected Writings of Thorstein Veblen edited by Wesley C. Mitchell; (1936) online edition

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