This Is the End


Markets, Risk and Human Interaction

January 26, 2012

The Twilight of the Leisure Class

Conspicuous leisure, conspicuous waste, conspicuous consumption. Veblen coins these terms in Theory of the Leisure Class to describe the strategies the noble and priestly classes employ to assert their status. Veblen observes that a life of leisure is the readiest evidence of the superior class, while anything having to do with the work-a-day world of earning a living is the occupation of the inferior class.

This argument does not ring true for today's society. If someone gave you the advice, “If you want to show that you are better than everyone else, then hang around obviously doing nothing productive, and even better, waste resources.” you would think they were utterly pathetic. And the fact that it doesn't ring true means we are different from many societies that have passed before us. We are seeing the twilight of conspicuous leisure, and of conspicuous waste and conspicuous consumption as well.

For the first two this is almost immediately evident. Leisure, conspicuous or not, is no longer viewed with envy.  Late-night infomercials might depict a life on a yacht free from work and worry as the ideal end result of the various get-rich-quick schemes, but the wealthy in society no longer are a class at leisure. The “one-percenters” work for a living, and the extremely wealthy who do not work for a living instead work for philanthropy. (So maybe we can add conspicuous philanthropy to the list, though the wealthy could then fairly complain that they can't win no matter what they do).

What goes for conspicuous leisure goes even more so for conspicuous waste. In our ecologically-conscious world, the notion of treating resources with disdain no longer signals pecuniary superiority, but rather boorishness and profligacy.  Our antipathy towards waste reflects in us being more frugal in what we consume. Veblen made a tight connection between conspicuous consumption and conspicuous waste – the former almost necessarily leads to the latter, so an end to the latter cannot help but reduce the former.

For conspicuous consumption, all you have to do is look around using a perspective from the consumption and advertising over the past decades when advertising appealed to being the pride of your family and the envy of you neighbors, to projecting success and culture, to commanding respect.  In the snail’s pace of social change, it wasn’t so long ago that we had the literal unveiling of the new year's automobiles, the adding and decreasing of chrome bumpers and ornaments, the rising and falling of tail fins, with the conspicuous consumer trading in for the new model every year. Now, with the exception of a smattering of high-end goods and designer labels, advertising focuses on the qualities of function and design; how much fun you can have with the product, how it will make your life easier or make you more attractive. If it is appealing to any image, it is not the one of “If you buy this, people will see that you must be rich and important” that was so dominant in the past. 

The end of the consumption arms race
The decline in conspicuous leisure knocks at least one leg out of the the relationship between tax breaks for the rich and job creation, because this relationship depends on the notion that if the rich, who are taken to be the job creators, are taxed more they will work less. But if status is evoked through work rather than leisure, then that relationship does not hold.  I do not know of the empirical work that has established this link in the past, but even if it exists, I question its relevance today. It is hard for me to imagine a CEO walking away from his job because his $25 million salary payday just nets him $15 million rather than $18 million.  Or for that matter not working as hard.  But in any case, one reason to walk away, the prestige of conspicuous leisure, has disappeared with the changing ethos of our society.

A reduction in the demand for conspicuous consumption also has implications for the economy. A drop in conspicuous consumption, not to mention in conspicuous waste, means a reduced demand for consumption. Even more than that, it means a change in the shape of the demand curve. As Veblen points out, “if the incentive to accumulation were the want of subsistence or of physical comfort, then the aggregate economic wants of a community might conceivably be satisfied at some point in the advance of industrial efficiency; but since the struggle is substantially a race for reputability on the basis of an invidious comparison, no approach to a definitive attainment is possible”. An end to conspicuous consumption means an end to a consumption arms race where demand can never be sated. There really is only so much you can eat, wear and drive, or click and stream, so if we take the “conspicuous” out of the equation we have a society going down a much different economic path.  I don't know how much of our production was geared toward deliberate but unnecessary discrimination of products, but whatever it was it is lower now.  And the higher end meant higher profit margins.  As everyone makes do with the functional commodity item, then by the definition of a commodity item the profits shrink.

Add to that a reduction in conspicuous leisure, and indeed more than that, having conspicuous work be what matters, and you have both lower demand for products and more people wanting to work.

Why Veblen's world is waning

Much of what we now demand simply does not fit in the conspicuous consumption equation. In particular, the tools of the virtual world, the iPhones and iMacs, the software and Internet, do not lend themselves to conspicuous consumption, any more than do light bulbs or electric outlets. Granted those on the lower rungs spend more of their income on the consumption of real goods than do those on the top rungs. And the share of income on goods that by nature are in limited supply, private goods, land, wine and art, even social status, is greater for the top rungs than for the lower. But for both, on the margin (and increasingly so over time ) consumption is becoming oriented more toward virtual goods – consuming YouTube videos, tweets and social networks, games and reality TV shows – and the hardware to access them. I suppose someone could come out with designer label, jewel-encrusted iPhones, but that just doesn’t seem to be the way things are heading. And how do you conspicuously consume what is out there for ready for the taking?

More important is that we now have better ways of establishing people’s positions in the social or pecuniary pecking order, for example by Googling them. And if you want to make a statement you don’t have to do it through invidious consumption of real goods, you can do it more effectively by leveraging the virtual world – YouTube, any of the various forms of social media, or a blog. Not that Gucci and Chanel are going to go out of business, but for most people that sort of status statement is becoming increasingly irrelevant. No matter what you are wearing and driving, a far better picture of you and your status is just a few clicks away. You don't have to drive a Ferrari to let everyone know you are rich and successful. If you are driving a Ferrari, what it will convey is that you – who as everyone who cares to Google you knows is worth tons of money – must like Ferraris.

(And, in any case, is the class distinction today the one that Veblen observed, one of direct overlord and humble worker? Do people give the same deference to those who can demonstrate the ability to indiscriminately buy whatever they want, to hang around the yacht club while others are working, to waste resources without a thought? In some quarters the objective is inconspicuous consumption).

The consummation of the industrial age
This is the way the Industrial Revolution was set up: Mass production of cheap, identical goods replacing the work of the artisan.  The entire point of industrialization, and what made the industrial revolution successful, was having production turn from luxury items for the rich to common-day products mass produced for the common masses.

As Mumford points out, industrialization changes what society values. The industrial society values what is new and fresh. Age goes hand-in-hand with rarity, but the industrial age puts an emphasis on the technologically advanced, the brand-new rather than on the rare. The industrial society also values conformity, (though at the same time decrying conformity and the resulting alienation of the crowd). This is because the industrial process is at its best, with the lowest cost and highest quality, when it is humming along producing many of the same product. There are those who will prefer a Rolls for other than purposes of conspicuous consumption, but even so will have to admit that any number of computer-designed, robot-welded cars rolling off the assembly line – and many cars must roll off to amortize the costs of development and production – are functionally superior. This is all the more true as we move into the technology space, to computers, phones and software, where newer and conforming products are not only better, but necessary. These are products that simply do not relate to the notions of sentimentality and well-worn comfort. 

Advertising post-conspicuous consumption
Industrialization is leading to a continuing convergence between the products that are consumed by the wealthy and the common man. To generate the fodder for conspicuous consumption, advertisers and marketers have waged a valiant battle for several generations against the process of industrialization by maintaining distinctions between functionally equivalent goods. Now advertising is beginning to pick its fights elsewhere.  One reason is that increasingly the medium of advertising is the Internet, either directly or because the next stop when an ad catches someone’s eye is to go to the Internet, and the Internet, and thus the ads, is more about information than about conveying status or image. Another reason is that unless the marketers try very hard, many goods are clearly going to be identical between the very rich and the not so rich. There was a time when cars were the focal point for conspicuous consumption; having a car singled out the wealthy, then having a car with chrome and fins. Now I drive an Acura TL-S and so does Mark Zuckerberg. Having a refrigerator was once the province of the wealthy, now you and I can have the same kitchen appliances as an ostentatious Donald Trump – minus the gold trim. 

In some areas, most notably and importantly in electronics, the push to spur conspicuous consumption has been given up without a fight. In the sphere of the Internet we are egalitarian. The wealthiest of the one-tenth of the one percent are holding the same iPhone and using the same applications as my babysitter. As I write this I am sitting in the walkout basement of my son’s house, using a computer that is identical to that of one of my former billionaire bosses. And another of my sons has a big-screen TV and sound system that is indistinguishable from his. Because we spend so much of our time on our phone and in front of out computer and TV, in the new age there is not much difference between how my son spends time versus the very rich, one in a twelve-thousand square foot mansion in Greenwich while the other is in a starter home, both sitting in the corner of some room staring into a 21” screen.  So as we spend more and more of our time on the Internet and virtual world, we become accidental egalitarians. As far as this goes, and granted it has not yet gone that far, it is a commendable result for society even it is not so useful for the economy.  

Taken to its end, industrialization class distinctions as revealed by conspicuous consumption.  This points to the objective of industrial production: goods in the realm of common consumption become removed from social distinction. This is what Mumford meant when he stated that the machine is a communist. Products bear the same impersonal imprint. They either function or do not. There is no difference between the light bulb – or phone, or computer, or Kindle – of the common and the wealthy to signal a difference in status. The consummation of the industrial revolution, and insofar as we link the industrial revolution to capitalism, of capitalism as well, will occur when the same can be said in all areas of production.


  1. In a defaltionary credit crisis, wealth means owning cash, rather than owing it. The wealthy qualify for credit, and don't feel the need/desire to use it. Cash in the bank is worth 2 luxory cars in the neighbors's garage, when those cars are financed by debt. True wealth becomes less and less visible.

  2. I counter with Rolex, Philippe Patek, any number of others.

    I gave up wearing a wristwatch in (I think) 1999 when my new Nokia phone could tell me the time at just the press of a button. However, the marketing of high end watches has since positioned these items (Andre Agassi, Steffi Graf) and indicators of "have", versus plebeians such as I who insist on telling the time in the most convenient manner.

    The niche of conspicuous is still with us, Mr. Bookstaber. Perhaps less ostentatious, but human nature doesn't change that quickly.

  3. I gave up wearing a wristwatch in (I think) 1999 when my new Nokia phone could tell me the time at just the press of a button.

    I never understand people who say this. It's still annoying to have to take the phone out of your pocket and turn it on.

    Anyway, interesting topic; I agree that probably most young people today would find it alien to think that "sitting around doing nothing" was a prime status marker. I quibble with this, though:

    Leisure, conspicuous or not, is no longer viewed with envy.

    Are you serious? Doesn't every working stiff dream of retirement? You say that these days the "one-percenters" work for a living, but I would surely ask: why? Why, if you had the money to retire at 40, would you continue working? Because - in contrast to former times - *working* is now a status marker? Maybe, for a certain segment of the elite, but I don't think this holds true for a large cohort of people that care much less about "status" than they do about comfort and their stupid job that they hate.

    If you mean to say that people no longer envy leisure as a class marker (but still possibly envy leisure itself), then I might agree.

    the extremely wealthy who do not work for a living instead work for philanthropy.

    Is "working for philanthropy" really "working"? How many hours a week do these people put in? I would like some data on the question of how the current super-rich actually spend their days before I can agree that this represents a change from previous eras.

  4. Rick, both commentators completetly missed the thrust of your post. I fully appreciate your intent and the direction of your thesis and believe you are spot on. Yes, there are still Rolexes being sold, but the reality is that few young people (<30) are impressed with them anymore. My son doesn't wear a watch at all and regards spending any money on a watch (especially a Rolex) as a waste. You can still buy real furs and I'm sure there are some people who value them them, but in general, real fur is so taboo as to signify someone completely out of touch with current conditions.

    In terms of work, I believe you were referring to the notion of work as a means to a life of leisure which I agree is eroding (Warren Buffet, Rupert Murdoch, George Soros are good examples). The classical notion of retirement (which is also eroding, BTW) at age 65 and then "puttering" around with some travel is not a means to demonstrate leisure, but rather an emblem of providing for yourself so that you are not dependent on the kindness of others.

    As far as philanthropy goes, the extreme wealthy do put in a somewhat hectic schedule. In the first place, managing that amount of money is not trivial adn with large sums involved comes media scrutiny, so that mistakes are noticed creating reputational damage.

    The idea of the super rich, spending all their time in the Hamptons or on a yacht and making a few phone calls to earn millions is more Hollywood than reality. The real point is that within a generation (<25 years), societal values are going to evolve sufficiently to disrupt the economic structure that will result in a painful adpatation to a new framework. It will be no less impactful than the industrial revolution that changed society from an agrarian system or post WWII that moved everyone out of the cities into the suburbs.

  5. Veblen was just examining how things worked in his particular time and place. His observations were but one example of a universal: the upper class will always attempt to distinguish itself from the middle and/or lower class. In Veblen's day you could do that via consumption, and idleness. The poor could not imitate that: those without fortunes who did not work starved. The middle classes who attempted to consume would similarly fail.

    The change in upper class behavior is a result of the welfare state. Today, those who do not work do not starve. And thus idleness is well advanced, especially among the lowest classes. There is no distinction to be gained in idleness; and as it is generally known to be sapping to the human spirit, the wealthy no longer desire it for their kids. (They do seem to be curiously tolerant of it in the poor, though.)

    As we continue to automate more and more jobs, this trend looks to continue. In the future, only the rich will work, and they will be condescending about it.

    1. I believe the "rich" tolerate idleness in the poor out of a patronizing sentiment that the poor simply cannot help the fact that they are too incompetent to play any meaningful part in modern society. So why waste time and energy complaining about the idle poor, when it is so clear to see why they are idle?

    2. I wouldn't count on that toleration lasting forever. There wasn't much toleration in the aftermath of Katrina for the poor who didn't own cars and were otherwise too incompetent to have prepared for a cat 5 hurricane. Next time could be worse. Think a global flu pandemic. Bye-bye poor people who can't afford the necessary medicine or don't have a bug-out shelter to flee to (preferably via helecopter) when things get bad.

    3. In RE: Leonard

      I find your broad-brushed characterization of the idle poor offensive and blind to some pernicious historical facts. Let me draw your attention to a recent PBS broadcast entitled "Slavery by Another Name"( It describes an institution that existed in American culture from shortly after the Civil War until 1942. Exploitation is a profound disincentive to the formation of any kind of work ethic that could reasonably be considered healthy.

      Perhaps the reason the elites work as hard as they do is because they have devised an incentive system that rewards them far in excess of the true value of their labor. I'm sure it will come as a complete surprise to you to learn that from 1975 to the present the productivity of the American worker--their output per hour--has more then doubled while their real hourly compensation has remained flat. My conclusion is that the work ethic works best for those who write the rules in the capitalist order. On this point, Adam Smith agrees with me.

      I believe that the current and on-going mortgage crisis in which many families are being driven from their jobs and their homes is just another egregious chapter in a long saga of class warfare in which those who have written the rules are once again engaged in a massive redistribution of wealth from the poor and middle classes of this country into the self-same pockets of the economic and political elites. There's nothing like being dispossessed of one's job and one's home as a consequence of the misconduct of the wealthy to inspire utter disdain for the concepts of fair play and the rewards of hard work than being stripped of one's meager debt-burdened wealth.

      May I recommend a journey down the backside of the bell curve onto the long-tail of joblessness and near homelessness for a starkly realistic perspective on a world of which you seem more than somewhat ignorant.

  6. Sure, we're all equal until we walk into a doctor's office and are diagnosed with an ordinary illness that can be cured but requires a shit-ton of money to do so. And we're all equal until our 18 year old children are admitted to $50k a year institution of higher learning.

  7. This comment has been removed by the author.

  8. I agree, of course, that not everyone is being caught up in non-Veblen, non-leisure and non-consumption. My argument is not absolute, but marginal. We are tending more and more in the direction I am mentioning, and even marginal changes can lead to significant results. Also, given that the Industrial Revolution took a century to effect much of its economic and social change, if we see the sort of things I am talking about as a secular trend, even a slow one, it could be increasingly important over time.

    And part of it being a marginal argument is that it is not so relevant for those with lower income. Maybe it will move over time from those with higher income to the middle income and continue down form there over time. Or maybe it will stop being relevant once it affects the top half of the wealth distribution. Which means those who are working two or three jobs and living paycheck to paycheck, much less those engulfed by the issues like lack of adequate health care and homelessness are social ills, are not touched by what I am saying.

  9. I still see conspicuous consumption when I look at Jay Leno's collection of more than 100 classic cars, or Larry Ellison's gigantic yacht. I still see status symbols when I see kids who "must" have the latest $200 sneakers. Sure, more people of all economic means are using the same iPhones and drinking the same $5 Starbucks lattes. Indeed, one thing that that the combination of industrialization and credit cards has done is make "luxury" items more available to the masses: folks earning $30,000 a year can own a Gucci handbag. This takes some of the exclusivity away from traditional notions of conspicuous consumption. So, while some still zig along the Donald Trump route of adding more overt glitz, many in the middle and upper classes zag, distinguishing themselves in more subtle yet conspicuous ways -- like eating $200-plus organic-locavore dinners at high-end restaurants. With all due respect, I think this is a very marginal argument that only holds true in certain segments of the economy and certain products.

  10. Interesting post. I think what the elite strive for to signal their status is not a "thing" such as leisure or expensive trinkets but exclusion. The leisure brands that did not democratize weathered the downturn well. Your point (and mumford') that if a thing can be produced then it loses its value as a social differentiator. These days almost anyone who wants can hop a flight to Italy and enjoy the same exposure of the British aristocracy pre-WWI. However, don't the elite have a different way to signal their status these days? Looks at the art market. I think it is going nuts because the good that are aquired cannot be re-produced. Wealthy asians are hoovering up asian art, especially if it is old. How is the rare car market doing? Also, in the US, there seems to be a growing drive amongst the very wealthy to own sports teams and pay outrageous sums for a losing franchise. There are probably many other things the wealthy buy that are out of reach for mere mortals--an unhackable phone is $3000, you can skip to the head of TSA line if you have a biz class ticket.

  11. Wallstreet Journal published a big Saturday essay by Charles Murray drawing exactly opposite conclusions,

    But I agree with this article and Charles Murray seems to be drawing invalid conclusions.

  12. Hmm. Some good points. I do not think the TSX driving Zuckerbergs are going to be the norm. He is an outlier, in every sense. Walton drove a truck, and he was not the norm either. Every dot-com millionaire had a vineyard. Conspicuous replaced by stealthy excess.

    The rich will still have their leisure, and although it may be different in form, it will be something the masses can't relate to. Among the neuvotech-rich, they will be partners in vineyards and their expensive hobbies. I'm FB friends with some of these people, and googlers pages are filled with updates on their trips to Patagonia or Fiji (this month). Others ponder Netjets entry levels and the Tesla S. Oh, they're "green" about it, if you can call a half-dozen foreign trips a year green.

    And yes, the telegrams of the past to make deals are replaced by logging into the VPN every night.

    Just because they won't (can't) buy an estate in the Hamptons, won't make them anything more like us.

    And the yachts just keep getting bigger and bigger:

    I'm pretty sure Mr. Z has a really nice G550 (or has access to one), if not a BBJ, and if he doesn't have one, he'll rent a yacht for $250K/week every summer.

  13. I would have to say a visit to Aspen or Telluride or Texas belies this thesis. The wingtip to wingtip private jets lining the parking areas at the airports in high end ski towns couldn't be more conspicuous or resource "hogging." Living in one of these towns I also observe Texans arriving in enormous gas guzzling vehicles that are as showy ans wasteful as anything in the past.

    Similarly these high end ski towns have cavernous homes - some upwards of 20-30,000 square feet that are used for mere weeks out the year and the rest of year sit empty consuming natural gas and electricity. Perhaps in these cases it might be more precise to say that the leisure class does a better job of hiding its waste and consumption in locations where they are isolated from the masses and can show off to each other.

    "Aspen - where the .001% kicked out the 1%"

  14. RE: "Or for that matter not working as hard."

    While supportive of a progressive taxation system and even the estate tax in about the current form I have to say I'm an anecdotal example of the above. I founded and helped run two sucessful business that produced real products with very tangible benefits to users of those products and society at large. Also employed a combination of about 275 people between the two businesses. Both were sold for good profit. Not Facebook profit but decent for small business startups.

    However I've been out of the work force/start up business world for 13 years now. I made my "nut" and now with a net worth of $10 million I wrestle everytime I'm presented a new business opportunity. Why do it again? Why go through the headache, stress, etc? Each marginal dollar I'd make in regular income would be taxed at something like 30-35% between state and local taxes. Additionally, if I didn't spend it it would be then taxed again, currently at 35% if I died. If I sold the business my capital gain would be taxed at 15% federal and some state taxes then again when I die at an additional 35% for estate tax. All rates scheduled to rise radically if nothing is done.

    So, in my head I think, do I really want to go back and earn money where somewhere from 40% to 80% is going to state and federal government? I'm a progressive Democrat and I think this! I don't know what the solution is but I'll tell you this entrepreneur with a track record is definitely deterred from trying again by the current system. I suppose, as friends do, I could look at it as working for charity and just plan on making whopping charitable donations when I expire.

  15. "Why do it again? Why go through the headache, stress, etc?"

    I couldn't agree more with this post, having done the same calculations on numerous occasions. I'm 45, similar finances, and find it would make more sense to make a lifestyle adjustment than expose myself to the significant brain damage given the likelihood that the incremental risk and tax adjusted excess returns would be small at best.

  16. Usually I agree with your commentaries in large measure, but I find myself struggling to agree with this one. I can only accommodate your views as a vanguard or visionary view of what's to come more than a description of our present reality.

    The crux is geography. Our perspectives are colored by where we reside on the planet, in the economic pecking order, and in the ecology of our communities. Your position in the economic pecking order has been earned through the development of a gifted mind and the application of a keen work ethic. The rewards you have reaped are unarguably well deserved.

    Unfortunately, not everyone who shares your perch in the economic pecking order deserves the respect you have earned. In Las Vegas, conspicuous consumption is a moral imperative. Here, I see the children of casino owners, who inherit enormous wealth, indulging themselves in opulent homes and drug-besotted lifestyles. I see Ted Binion overdosing from heroin. I see Paris Hilton arrested on cocaine charges. I see pimps competing with one another showcasing their wealth while eluding police and the IRS.

    Foreclosures and joblessness are rampant. My ecology is one of a neighborhood, once a source of pride, now decaying with vacant homes, overgrown yards, broken windows, and graffiti. My ecology includes talking to neighbors who once proudly drove pick-up trucks and family sedans to work, now riding the bus to the unemployment office. My ecology used to include conversations heavily seasoned with anger and resignation, which have changed, not because of a changing economy but because those defeated by the economy have drifted away, taking their rage and resignation with them. The nation and the world are much more akin to Las Vegas than Washington, I fear. I would be happy to be convinced otherwise.

    You mentioned that your babysitter uses an iPhone much like the wealthiest one-tenth of one percent in our economic order. I have nieces and nephews who also use iPhones, the majority of which are purchased by wealthy parents. I think a more salient analysis might look at the number of iPhones owned by the children of median income families and below as compared with families in the top one-tenth of one percent of our population. With the bifurcation of our culture, the line that defines the beginning of conspicuous consumption is the line that separates the haves and the have-barely-enoughs.

    Your analysis seems well suited for the future of American and Western European economies, but not to emerging or less developed economies. Consider a recent broadcast from 60 Minutes entitled "India's love affair with gold." The demand for gold in India represents roughly one third of global demand. A $500 gold necklace that would be considered stunning at any middle-class American wedding would be considered an embarrassment at an Indian wedding where the standard for an acceptable bauble hovers near $20,000. While the US and Western Europe may be leading us into a more modest and less opulent future, I can fairly predict that the emerging economies will be tugging quite strenuously in the opposite direction. China has a quite similar obsession with gold.

    Your use of your babysitter as an example raises a question in my mind about the scope of your vision, which seems quite clear when drawing from your daily ecology, but not so much, I beg to suggest, when you try to look around the edges of the bell curve into the shadows concealing the long tail opposite your own. In this regard, you and I, who once played football on the same field, may now reside in separate nations.

    Buddha teaches that dissatisfaction is the natural state of man. If this is true, then continuous consumption, if not conspicuous consumption, affirms the durability of capitalism, though not its form.

    With respect

  17. Nice article. I personally think that advances in nanotech and personal fabrication will facilitate an equalization of the classes with respect to material needs and wants. This combined with AI will necessitate a new economic paradigm.


Note: Only a member of this blog may post a comment.