“Slipping into designer clothes or cars or anything can raise the insecurity from the doldrums of nothingness to the fantasy level of ‘I’m someone, and if you don’t believe me, just look at my label!”’ In order to be admired, some people prefer to flaunt their possessions just in order to publicly display their economic wealth and power instead of covering their basic needs. Of course, there is nothing wrong in enjoying the fruitage of one’s labour. But is it wise to flaunt or parade, our possessions?
Today we shall be covering one such practice which has been explained by an American economist and sociologist Thorstein Veblen in his 1889 book, The Theory of the Leisure Class, Conspicuous Consumption. Sometimes, people tend to buy more of an expensive commodity or a commodity whose price is rising just to show off to the society that they are richer or wealthier than others. This is called conspicuous consumption, also known as the snob effect where people tend to purchase expensive commodities just for the sake of their status symbol. For instance, a person may purchase diamonds or luxurious cars even when their prices are rising; or a person may join a golf club in order to get in touch with the elite group of rich businessman.
It is a universal fact that consumers derive ‘utility’ from the consumption of goods. According to Veblen, there are two distinct characteristics of goods for providing utility. The first is “serviceability” of goods, or in other words, that the consumer can get his job done through the good. Let us take an example of two businessmen in which one of them has the motivation to drive a luxury car rather than an economy car. One is Jacob and the other one is Marc. Both are partners in the business and earn almost equally. Both plan to purchase a car. Jacob purchased a BMW which was around 30-40 Lakhs while Marc purchased a Honda City which was around 10-12 Lakhs. Now what Veblen wanted to convey is that both BMW and Honda City cars are equally able to get to a given destination. The other feature of a good is what Veblen called its ‘honorific’ aspect. Driving a BMW car shows that the consumer can afford to drive a vehicle that others may admire; that admiration comes not primarily from the car’s ability to get the task done but greatly from the visible evidence of wealth and fame that it showcases. The vehicle is thus an open and outward display of one’s status in conspicuously consume; some feel it is a result of capitalism as societies become more industrialized and ostentatious, while others believe that the goods we consume defines one’s personality. An outcome of the dual characteristics of goods is that such conspicuous consumption is “waste.”
Conspicuous consumption is categorised as “waste” not just because most people use it for flaunting, but because the production of luxury goods requires more resources than the production of non-luxury goods. If we continue the above example, it simply means that the difference between BMW and Honda City is waste either in terms of pricing, resources or other factors. But this does not mean that luxury goods should not be produced because somewhere it also provides extra services and better quality.
However, due to the democratisation of consumer goods, luxury goods have become far less useful as a means of displaying wealth and social status. As now ‘consumer is king’ the obligation of the producers or manufacturers is to provide goods to consumers at reasonable cost with high quality. For example, affordable companies like Mahindra, Hyundai, Toyota started providing cars with luxury features at reasonable prices. Also, there are dramatic changes in elite spending as it is becoming more educated and could be referred to as ‘Aspirational class.’ This educated class is now cementing its status through prizing knowledge and building cultural capital i.e. preferring to spend on education, services and various other human capital investments over purely material goods.
Let us see conspicuous consumption on the grounds of economics. High levels of conspicuous consumption may be seen as socially as undesirable on two grounds; firstly, as it is very much associated with high relative income, high levels of conspicuous consumption may be an indicator of high levels of income inequality, which may be found instrumentally objectionable; secondly conspicuous consumption differs from other forms of consumption because the purchase of purely material goods is not because of the direct utility that is derived from the good’s alleged high quality, but rather the social prestige associated with the consumption of it.
Thus, conspicuous consumption is a theory that is both economic and psychological. The living or economic conditions that an individual resides in can be a deciding factor as to whether a person decides to conspicuously consume goods or not.