Conspicuous consumption is the purchase of goods and services for the sake of publicly exhibiting wealth or status
The overt display of luxury goods and services by the ruling classes in the late nineteenth century led Thorstein Veblen to formulate his economic theory of conspicuous consumption. He wrote, “Conspicuous consumption of valuable goods is a means of reputability to the gentleman of leisure.”
In his influential book The Theory of the Leisure Class: An Economic Study in the Evolution of Institutions published in 1899, Thorstein Veblen (1857-1929) identified a distinctive feature of the newly established upper class of the late nineteenth century and the rising middle class of the twentieth century: their accumulation of luxury goods and services for the expressed purpose of displaying prestige, wealth, and social status. Veblen, a U.S. economist and social scientist, viewed this phenomenon as a negative symptom of the new rich that would inhibit social adaptation to the necessities of the industrial age.
The intention for exhibition embodied in the idea of conspicuous consumption is in contrast to the securing of goods and services for their intrinsic value or their originally established purpose. Focusing on the “conspicuous” aspect of the term, conspicuous consumption can conceivably occur among members of any socio-economic class, from the richest to the poorest. Acquiring status indicators can happen in any social setting. Focusing on the “consumption” aspect of the term, conspicuous consumption relates to the purchase and display of goods beyond what is necessary, and applies primarily to the middle and upper classes, who then set patterns of social behavior and consumption that are imitated by others. In this respect, it is closely tied to consumerism.
One ramification of Veblen’s insights into conspicuous consumption relates to the idea of a “luxury tax.” Such a tax increases costs on goods and services that primarily serve as declarations of affluence, in order to raise revenue and redistribute wealth with little loss to consumers who purchase for the sake of status and not utility. It may also gradually reduce conspicuous consumption of such “positional goods,” or “Veblen goods,” which bear the namesake because demand for them increases as price increases.