What Is Conspicuous Consumption?

Conspicuous Consumption Explained in Less Than 4 Minutes

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Conspicuous consumption refers to the purchase of goods that convey economic status. People who purchase luxury items such as high-end cars and designer clothing are said to be engaging in conspicuous consumption, as these goods appear to demonstrate wealth.

The term was coined by American economist Thorstein Veblen in his 1918 work, “The Theory of the Leisure Class,” which postulates that upper- and middle-class people buy luxury goods to project wealth and exclusivity to others. Learn about how conspicuous consumption works and how the theory developed.

Definition and Examples of Conspicuous Consumption

Conspicuous consumption refers to the acquisition of goods that signify wealth. It is aimed at improving a consumer’s social standing and reputation. For example, a person may buy an expensive luxury car or a great quantity of recreational equipment to invoke envy and admiration from peers.

According to Veblen’s theory, an item is considered luxurious if it’s expensive, of high quality, and exceeds practical use. There is an element of wastefulness involved in Veblen’s theory of conspicuous consumption. Necessities are not related to conspicuous consumption; an item labeled in this way must be superfluous to a person’s basic needs.

Conspicuous consumption is exemplified by an item such as a diamond-encrusted watch. The diamonds are ornamental and don’t affect how the watch functions or add utility; rather, it is a visual display of wealth.

Alternate name: Visible consumption

The slang term “bougie,” derived from “bourgeois,” which refers to the upper and middle classes, relates to conspicuous consumption because it denotes expensive goods that exceed practical function and serve to set the owner apart from other members of their economic class.

Another example of conspicuous consumption in pop culture is the 2013 Martin Scorsese biopic “The Wolf of Wall Street.” The film is a dramatic depiction of excess, with scenes ranging from grandiose mansion parties to drug use on yachts.

Veblen goods, which are items for which demand grows as price increases, are associated with conspicuous consumption. High prices generate demand for these types of goods among the wealthiest consumers. Obtaining these types of goods at high prices is meant to impress other people.

How Conspicuous Consumption Works

Veblen’s “The Theory of the Leisure Class” speculates that a leisure class, or upper and middle classes, is rooted in capitalism. Veblen theorized that an economic hierarchy formed in developed societies where labor is delegated to the lower classes and leisure is held in high regard. Conspicuous consumption becomes a lifestyle of those who belong to the middle and upper classes.

Veblen states that the importance of wealth is to impress others with it. According to the theory, people are motivated to purchase luxury goods for more than their intrinsic value. The main point is to make other people aware that they have the privilege of owning these goods.

Veblen noted that pecuniary emulation, or the desire to equal or surpass another person’s financial status, drives conspicuous consumption.

While people do purchase luxury items to enjoy them, the overarching motivation for conspicuous consumption is to impress others.

Conspicuous consumption is typically associated with wealthy people, but it also includes the middle and working classes. Between a global market for counterfeit goods and many people taking on debt to afford luxuries, conspicuous consumption is widespread in our society.

Criticism of Conspicuous Consumption

Veblen’s book is often seen as a classic critique of conspicuous consumption, but despite that, some economists have condemned the theory. Critics have said that because the theory only pertains to purchasers of luxury goods, it cannot be applied to all types of consumption as Veblen intended.

In addition, the concept is based on the idea that primarily the upper class determines spending, which excludes the influence of consumers on the lower end of the economic spectrum. Other arguments state that the way status is conveyed has changed over time, and it is now more often considered elite not to display wealth conspicuously, or that lifestyle rather than social factors now drives spending, which varies from what Veblen theorized.

Key Takeaways

  • Conspicuous consumption refers to spending on goods or services that are considered exclusive and valuable.
  • Conspicuous consumption applies to items such as luxury cars and clothing but also to other visible displays, like lavish parties and illicit substances.
  • Although the traditional conspicuous consumer is wealthy, people from all economic classes can participate in conspicuous consumption.