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Wednesday, January 04, 2006

Pecuniary, Conspicuous Regulation and the Public Need

Yesterday, I examined one of the roots of modern conservatism, claiming that personal liberty and self-determination have to be balanced against the inherent inequalities of modern life. Obviously, I'm not the first to make such a statement. But if we are going to look at historical conservatism, then why not look to historical liberalism to answer?

Thorstein Veblen was a Norwegian-American economist from Wisconsin. He turned traditional economic defenses of liberty on their ear by claiming that Adam Smith's "Invisible Hand" simply didn't take into account the non-economic pressures on people. Economics, Veblen argued, is not purely economical.

Veblen's most enduring work is entitled The Theory of the Leisure Class. In it, he traces the creation of a leisure class - a group of people so far removed from the hardship of earning a living that they may engage in practically any activity they desire - from the early dependence of society upon its warriors and witch-doctors. Because early society needed physical protection, it would exempt its best warriors from physical labor so they might be near the village in case of attack. Because early society also needed a divine mediary to prevent the wrath of the gods from descending upon them, they also exempted their witch-doctors, shamans, and clerics.

Veblen isolates an image of social classes during his life. Class, to him, is based on how far removed a person is from physical labor. Those who are laborers are the "working class" (naturally) and form the lowest level of a pyramid. Above them are the ones that hire people to perform labor - mid-level managers or shop bosses. The next level above them are comprised by the owners of the businesses and workshops (think large factories that are privately owned). Above them are those who are so wealthy that they make their living off of what we today call "venture capital". They invest their money with the business owners in return for a share of future profits. They not only do not perform work themselves, but they actually never meet people who do - except as personal servants, of course.

At the very bottom of the social classes - stuck down in the basement - are those who cannot even accomplish physical labor.

The real structure of society today doesn't exactly conform to Veblen's theory - but I think it is still close enough to work. Money, surprisingly, isn't enough to boost you into the next social class. Otherwise union plumbers would be ranked above university professors, and most people would agree that they aren't. The professor has more prestige attached to his or her profession, is generally considered to follow a more noble calling, and his or her opinion will generally carry more weight in an open debate. At least, that holds out until the toilet won't flush - in which case the plumber is paid and dismissed hurriedly.

Veblen's model doesn't account for the ability of an entreprenuer to move rapidly from one level to the next - but I believe he would see that as the rare exception that proves the rule. Bill Gates and Michael Dell did, in fact, move into the upper echelons of society - at least to an outsider - but there are very few Dell's and Gates' in the world. However, Gates and Dell do not escape from the remainder of Veblen's theory.

Part of being in an exempt class is presenting a display that indicates it is deserved. The primative warrior must carry a club and tattoo his body. The witch-doctor must shroud his acts in mysticism and, in almost every case, must wear special garments or have special diets or have direct contact with only certain people.

So don't expect Gates and Dell to live in a tar-paper shack with a tin roof or walk around in worn out shoes. Wealth is useful (in a social context) only if it lifts you to the next social class. In other words - if you've got it; then you must flaunt it.

Veblen called this "pecuniary emulation". Parents of teen-agers will recognize this fairly quickly. No teen wants to be seen at school wearing K-Mart shoes - no, it has to be Nike or Adidas or whatever the fashion is for this year. It doesn't matter that the K-Mart shoes are just as good, or even better. What matters is that the Nikes, because they cost more, carry more social capital. By dressing like the next higher class, the individual hopes to be included as the next higher class - after all, the class distinctions are fairly small and arbitrary when income is looked at for explanation.

Because only those at the very top can truly have all the leisure time they want, it is important for lower classes to make sure that everyone sees them when they engage in leisure activities. Veblen sees competitive sports as an example of this. To watch a baseball game takes considerable leisure time - several hours worth. Especially today, you can get a better view of the game at home than you will at the stadium - and at a lower cost. So why do people go? Because by going they are able to demonstrate that they can engage in several hours of leisure time - they can afford the "opportunity cost" of taking off from work and spending the day at the ballpark. That, of course, is why we now have luxury boxes - so those who can truly afford the leisure can be pampered while showing off.

This "conspicuous leisure" leads directly to "conspicuous consumption". It isn't enough to just stay at home and eat your meat and potatoes, you have to go to a restaraunt and make sure other people see you ordering the kobe steak with the Klondike Gold potato. It isn't enough to drive a Honda CR-V, you have to get a Hummer (which is more expensive, less fuel efficient, less safe, and more prone to mechanical failure than the Honda - at least, J.D. Powers says so). So why would anyone buy a Hummer?

Veblen saw these traits, inherent in society and fed by capitalism, as being the foundation of the Gilded Age. While Veblen didn't say this was necessarily a bad thing as a whole, he did point out that it led to a number of human rights problems - the denigration of labor and those who engage in it, the subjection of women and racial minorities, the tendency of those at the bottom to remain permanently trapped in near-poverty. There is no self-correction to this system. Alas, there are no spirits to visit Ebeneezer and reform his greed and graft.

That, my friends, is why government must be involved in economic regulation. The only alternative is periodic social revolution - complete with widespread killing, raping, and pillaging of the upper echelons by those who have been kept under their heel for too long.

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