Picture a crowd chasing after a product of a high-end luxury brand despite knowing very well the same utility could be derived from a cheaper-priced good. Think of the classic Burberry check cashmere scarf, the patent Supreme white t-shirt, a Rolex watch, a Tiffany necklace, or the Hermès belt buckle, to name a few. Rang a bell, didn’t it? Well, I’m sure it did for most us.
Conspicuous consumption refers to the practice of increasingly spending money to buy more and more expensive items as a depiction of affluence and social acceptability. The term was coined in 1899 by the American economist and sociologist Thorstein Veblen in his book ‘The Theory of the Leisure Class”. The type of goods for which demand increases as the price increases are called Veblen goods.
The exclusive nature of certain luxury goods leads to this phenomenon. These luxury items are characterized by an upward sloping demand curve as increasing prices make the product more desirable. Veblen, in his book, described the two aspects of a good that are recognized by every consumer—the serviceability and the honorific aspect. Serviceability simply refers to utility aspect of fulfilling the prime purpose or ‘getting the job done’, whereas the honorific characteristic talks about the establishment of a ‘wealthy’ status due to proud ownership of these products.
However, in the 17th and 18th centuries the practice of consumerism had not taken shape as what we know it to be today. Many religions such as Christianity preached prudence and looked down upon consumerism as resources were considered to be gifts from God that should be protected and not misused. A very interesting tradition grew out of this. Since huge price gaps were inevident at the time for most utility goods, people established their monetary superiority through quantity of purchase. Let us look at wine as an example. Wine has been used for multiple purposes over the decades. Its use alongside medicines in the 18th century led to its classification as a necessity good. Still, despite the fact that everyone bought wine, the wealthy could be differentiated as bulk purchases showcased their indulgence.
The growth of population with the onset of industrialization led to generation of employment and rise in income for most. This steady growth of income led to improvement in the standard of living of people and more disposable income to be spent after meeting the basic needs. The 5-tier need hierarchy theory given by Maslow explains how people first meet their basic physiological needs, followed by safety, belongingness and love, esteem, and self-actualization needs respectively. Following this pattern of psychology, human beings start attaching importance to materialism and consumerism in order to fulfill their esteem needs after crossing the belongingness threshold. This materialistic outlook allowed them to establish themselves in society, which ultimately led to it becoming the norm that we know of today.
