Late Week 10 Critical Reading (which we talked about earlier)

The ideas that Veblen gave on the “leisure class” are incredibly valid, for the luxuries used by the class are bought for the most part in order to make one seem more esteemed.  The one problem I have with the passages, though, was that they never gave specific examples outside of alcohol and narcotics, which are themselves peculiar examples of luxury goods.  Though it is quite likely that alcohol and narcotics were considered rare in 1899, alcoholism was a big enough problem in the time period to drive the temperance movement, and some narcotics, such as opium and cocaine, were plentiful enough, as can be evidenced by the large number of opium addicts in China following the Opium War and the use of cocaine as an ingredient in an inexpensive soft drink.  It seems imprudent not to go into greater detail on matters such as this, for especially in turn-of-the-century Europe, the Industrial Revolution had made the line between luxury and common very fine.  Also, I find that if Veblen had been writing today, he would have probably used more distinct and apparent luxury goods, such as private airplanes and houses in the Hamptons, and would have been able to make his case far easier to the general population.

                My first question is simple: How would the elimination of Veblen Goods (or, as written in his book, goods which increase in desirability as they become more scarce) affect the economy?  On a further note, with so many things being bought only by the rich for the sake of the rich, would the elimination of such goods lead to production of goods that could be bought by a wider variety of people or simply decrease overall production?

                My second question applies to the criticism I made in the opening paragraph: at what point does somebody start to find themselves in the “leisure class,” especially if the goods they are consuming are becoming more purchasable by people with less wealth.  On a similar note, is it possible in Veblen’s world for someone to be wealthy, a member of the leisure class, and not want to consume any of these goods or act the way he states?

                My third question revolves around the idea of “Veblen Goods:”  what is the difference between the goods afforded to the leisure class in The Theory of the Leisure Class, which are economically proven to exist, and a Giffin Good, which Professor Rizzo has argued profusely for the idea that they are not economically viable?  I honestly found quite a few similarities between the two of them.

                In the modern economy, prices remain high for luxury goods because of not just their extreme scarcity, but because of the high quantity that would be demanded if the prices were affordable to the general population.  The idea that certain goods are only bought to increase prestige is believable, but what point do the goods serve as little personal purpose and so much social purpose that they are used purely for esteem purposes.  These goods, if made plentiful, would lose their meaning, regardless of the pleasure they brought to their upper-class consumers.  As I mentioned earlier, you can even argue that Veblen Goods can also function as Giffin Goods in an economy, for the extreme rich may by more if them as prices increase to make them seem wealthier.  Regardless, the most interesting aspect of the passage remains the idea that once we reach the point where social status means more than the use of a good, that the good can actually start going against some of the basic ideas of economics.