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Sounds. Music, radio, podcasts. This

1:22

is In Our Time from

1:24

BBC Radio 4, and this is one

1:26

of more than a thousand episodes you can

1:28

find on BBC Sounds and on our website.

1:31

If you scroll down the page for this edition, you'll find

1:33

a reading list to go with it. I hope

1:36

you enjoy the programme. Hello. In 1899, at

1:38

the height of the American Gilded Age, Thorstein

1:41

Veblen wrote The Theory of

1:43

the Leisure Class, a reminder

1:46

that all that glisters is not

1:48

gold. Veblen picked up

1:50

on traits of the waning landed class of

1:52

Americans and showed how the

1:54

new moneyed class was adopting these in ways

1:57

that led to greater waste throughout society. He

2:00

called these conspicuous leisure

2:02

and conspicuous consumption, and

2:05

developed a critique of a system that

2:07

favored profits for owners without regard to

2:09

social good. It was a

2:11

bestseller and funded Veblen for the rest of

2:14

his life. With me to

2:16

discuss the theory of the leisure class

2:18

are Matthew Watson, professor of political economy

2:20

at the University of Warwick, Bill

2:23

Waller, professor of economics at Hobart

2:25

and William Smith colleges, New York,

2:28

and Mary Wren, senior lecturer in economics

2:30

at the University of the West of

2:32

England. Mary Wren, what was

2:34

so-and-so in Veblen's background? Veblen

2:37

was born in 1857 in Cato, Wisconsin. He

2:41

was the sixth of 12 children,

2:44

and just a decade before

2:46

his parents had immigrated over

2:49

to the United States in

2:51

a wave of immigration from

2:54

Norway, the dispossessed farmers

2:57

of Norway, into the

2:59

Midwest. His parents farmed. Eventually,

3:01

they built up enough money,

3:04

wealth, to move to Minnesota

3:06

and to buy a farmstead there. Veblen's

3:09

family was very focused

3:12

on education, made sure all 12

3:14

of their children received

3:16

all of their schooling, and pretty

3:19

rare for those times, they had a

3:21

pretty egalitarian view of education,

3:23

so all the boys and girls were

3:26

encouraged to go to school. Close

3:29

to the Veblen farm, a new

3:31

college opened, Carleton College, and

3:33

the Veblen siblings would

3:36

go through there to study for their

3:38

undergraduate degrees, and Veblen did as well.

3:41

While he was at Carleton, by

3:44

chance, one of his professors was

3:47

John Bates Clark, who would go on

3:49

to become a very famous economist. And

3:52

a great influence on Veblen. And had a great

3:54

influence on Veblen. What

3:56

was changing in America broadly in

3:59

the so-called Gilderoy? Why was it gilded? It

4:02

was gilded because it was a time

4:05

of wealth inequality

4:07

that did not originate

4:09

from inheritance. So it

4:11

was a period of

4:14

what we call in the United States the

4:16

robber barons. And these

4:18

robber barons were industrialists

4:20

whose names we

4:22

still know today. Something

4:25

about Carnegie, Rockefeller, Mellon,

4:27

JP Morgan, the Vanderbilt.

4:30

Their wealth came from the

4:32

rampant industrialization as the United

4:35

States was shifting from an

4:37

agrarian economy to a

4:40

manufacturing economy. You did a

4:42

good job to ask what about the rise of

4:44

marginalism where pay was linked

4:47

to profit not production? Certainly. Certainly.

4:50

Economics in the United States

4:52

wasn't a unified discipline

4:54

by any means at this point.

4:57

And they were looking for

4:59

a way to explain wealth

5:02

inequality. And over

5:05

in Europe, the marginalists had developed

5:07

and were developing the

5:09

marginal utility theory. And

5:11

so economists over in the

5:13

United States, specifically, Veblen's

5:16

old teacher, John Bates Clark, took

5:19

marginal utility theory and applied

5:21

it to marginal theory.

5:26

It's a way of looking at a

5:28

firm's production and revenues in

5:31

incremental bits. And

5:33

so it is marginal theory is

5:35

saying how much output would we

5:37

increase if we increased labor

5:40

by one? So if we hired

5:42

one more worker, how much extra

5:45

production would we get out of

5:47

that worker? What benefit did

5:49

that have? Well what it

5:52

did, what John Bates Clark was able

5:54

to do was to take marginal productivity

5:56

theory and apply it to labor so

5:58

it justified the wages

6:00

that people received. And

6:03

in effect justified wealth inequality

6:05

because it said that according

6:08

to the theory that people

6:10

were paid according to their

6:13

productivity, according to their contribution

6:15

to production. Thank

6:18

you very much. Bill Wohler, historically, can

6:20

we go back to the leisure class?

6:22

Who were the leisure class in Vamblin's

6:25

view? Originally the

6:27

leisure class was originally based on a

6:29

sexual division of labor between men and

6:31

women. But once we get to the

6:33

era of agriculture, the

6:36

division of labor ceased to be

6:38

more important and was who controlled

6:40

the surplus. In any agricultural society

6:43

that produces a surplus, it has

6:45

to be administered. Whoever

6:47

administered it often had a great

6:49

deal of power and then they

6:52

eventually justified that historically based on

6:54

ideology or religion. So

6:56

you got a group of people who

6:58

administered the surplus, had access to the

7:00

community's wealth on a differential basis, and

7:03

then had to justify that ideologically.

7:05

They generally speaking were not producers.

7:08

They might have been clerks, priests,

7:11

warlords, and then they would

7:13

become the leisure class and

7:15

would be separate in

7:18

terms of being honorifically more important

7:20

in that culture. The

7:23

trappings of those offices continued

7:25

through the agricultural period. Now,

7:28

of course, in the medieval period, birth

7:30

determined where you were in the

7:32

social hierarchy. So

7:34

the aristocracy had

7:37

access to the agricultural surplus and

7:39

they used that to develop a

7:41

social order for themselves that was

7:44

different from the common

7:46

agricultural worker. That

7:48

persisted for a very long period of

7:50

time and was very static. In the

7:52

medieval period, a thousand years where essentially

7:55

the social structure in Europe does not

7:57

change significantly. pointed

8:00

out with industrialization that makes this

8:02

system a lot more dynamic and

8:05

it changes rather quickly. It's

8:07

not a stable system. It changes

8:10

much more rapidly under industrialization because

8:12

of mass production. And

8:14

mass production means that those

8:17

particular items or activities that

8:19

the leader class exclusively had

8:21

access to are now

8:23

much lower in cost and become accessible

8:25

to people lower in the

8:27

income hierarchy of society. Yes, such

8:30

as what had they access to that they didn't

8:32

have before. Luxury goods

8:34

are things that were perceived as

8:36

luxury goods. For example, buying homes,

8:39

manufactured clothing, tableware, all

8:41

these things got much more available

8:44

and much less expensive after

8:46

industrialization and mass production comes

8:48

in. Broadly, Devlin, his

8:51

approach to economics is said

8:53

to be evolutionary in the

8:55

sense of Darwin evolutionary. Obviously,

8:58

it comes from Darwin. But what did that mean to

9:00

him as an economist? Well,

9:02

first of all, that there was no

9:04

tendency towards equilibrium. There was no particular

9:06

trend in the economy, that the economy

9:08

would move by blind

9:11

drift unless we intervened in

9:13

it. The source of the

9:15

evolutionary change, though, was obviously not biological.

9:17

It was social. And

9:19

he identified the changes

9:22

in social institutions as the source

9:24

of the evolutionary change. Matthew, what's

9:27

others may disagree with? What would you

9:29

say was motivating Devlin? I think we

9:31

see a very clear and compelling message

9:34

in everything that he wrote. And that

9:36

helps us to understand what was motivating

9:38

that writing. Just because the

9:40

world looks as it does now, he said, doesn't mean

9:42

that it always has to look this way. So

9:45

there's an instinct underpinning his work

9:47

about social change and that social

9:50

change can always be harnessed in

9:52

an attempt to derive a better

9:55

world than the one that we live in now. Do

9:57

you think social change is outside? the

10:00

polio of ordinary people, did it happen

10:02

because of mass movements, subterranean

10:04

movements almost as it were? Yes and

10:06

no. Yes to

10:09

the extent that without mass movements

10:11

then the social institutions of the

10:13

economy were unlikely to change in

10:16

any dramatic way, but no

10:19

insofar as the instincts on

10:21

which those social movements were

10:24

based were not necessarily

10:26

generated from within. It was

10:28

a back and forth between economic change

10:30

and social change, redrawing the

10:33

cultural boundaries of the economy.

10:36

Was this point of view of his, was

10:38

it special to him or a few people

10:40

taking the same thing at the same time?

10:43

I think there are again elements of both,

10:46

that his biography becomes important

10:49

to understanding the specificities of his

10:51

work. It was a real shock to him

10:53

when he left his tight knit

10:56

Norwegian community in Minnesota and

10:58

found out that there was a world out there

11:00

that didn't operate along the same lines. The

11:03

Lutheran upbringing which stayed

11:05

with him at least to an extent all the other

11:07

way through his life was not

11:09

something that he encountered outside

11:12

of his own community. So he was

11:14

a stranger in his own land in

11:16

many ways and I

11:18

think that that estrangement from

11:20

more general American society helped

11:23

his argument that things could always

11:26

be different because he'd experienced first

11:28

hand something that was already different.

11:31

Is it useful to talk about him as an

11:33

insider and an outsider? If so, inside and outside

11:35

what? He certainly had

11:38

outsiders experience of

11:41

American society at that time. Because of being

11:43

brought upon a farm in the Midwest you

11:45

mean? Yes, and not

11:47

speaking English until relatively late

11:50

in his life and

11:52

not being exposed to the cultural norms

11:55

of a consumption society that

11:57

went beyond the consumption of

11:59

necessities. So there was a

12:01

definite outsider tendency in

12:04

his biography, and I think he also played

12:06

up to that both in his work and

12:08

in his career more generally. But

12:11

he also had some very favorable

12:14

attributes as well. Indulgence

12:16

of family, friends, wives,

12:18

employers, college administrators to allow

12:21

him to think very much

12:23

in his own way, unencumbered

12:25

by other demands on his

12:27

time. So if you look at

12:29

the background to his academic career, he does look

12:31

like a consummate insider in

12:34

that regard. Mary, can

12:37

you briefly tell us what the new

12:39

leisure class, what trolled

12:41

then about it? This is

12:44

a period where industrialists are working

12:46

very hard and

12:48

are amassing huge

12:50

wealth. And not only is

12:52

there a concentration of wealth, there's a concentration of

12:54

markets as well. And

12:57

so we see these robber

12:59

barons amassing wealth,

13:03

and they're doing so through work in

13:05

the business world, work in manufacturing,

13:08

in steel, in oil, in

13:10

finance. With

13:12

this new leisure class that is

13:15

essentially having to work very hard,

13:17

they are having to make

13:20

connections with one another. They

13:22

are constantly expanding their empires,

13:24

so to speak. We

13:26

see that the leisure class has a

13:28

very different character than it did previously

13:31

in the medieval period, like Bill

13:33

was saying. It's not

13:35

a leisure class that's based on landed

13:38

aristocracy or inherited wealth. This

13:40

is a leisure class that

13:44

because these are industrialists, because they

13:46

are putting in such hours expanding

13:49

their empires, because they are

13:51

working so much, they

13:53

have to signal their wealth in

13:56

a different way. And so,

13:58

for instance, conspicuous wealth. leisure takes on

14:00

a very different form. Can

14:03

I turn to you for that one Bill?

14:05

How do you see conspicuous leisure, as I

14:07

keep calling it? Very

14:09

nice for the audience to have a

14:11

real transatlantic cast of mind involved in

14:14

this discussion. Conspicuous leisure does

14:16

not mean that they were

14:18

sitting around doing nothing. They

14:20

were engaging in activities that

14:22

weren't particularly productive. Sports

14:25

like polo, yachting, engaging

14:27

in transforming their fashion every

14:29

few months or every few

14:32

years, building extremely large homes

14:34

in multiple locations that they traveled

14:36

back and forth to, but

14:39

they weren't employed. Whereas

14:41

conspicuous consumption is simply the purchase

14:43

and use of goods. And you

14:46

can do that when you don't work. So

14:48

the conspicuous leisure of the next generation of

14:50

the leader class is mostly

14:52

carried on by their wives and

14:54

children. The wives doing charity work

14:56

to demonstrate that they don't need to keep

14:58

a home, sending your children

15:00

to university so that they can sit

15:03

around for four years, study the classics

15:05

and not learn anything useful that could

15:07

possibly be productive. You're demonstrating

15:09

to the community that they don't need to

15:11

work. So consumption grows

15:14

dramatically during this period of

15:16

time as a social symbol of wealth. And

15:19

what is conspicuous leisure look like? What

15:22

is conspicuous? Well, parties

15:24

on the society page, lighting cigars

15:26

with hundred dollar bills, driving very

15:29

expensive automobiles when no one else

15:31

has an automobile, taking

15:33

vacations to Europe for very long

15:35

periods of time. The children

15:37

of the wealthy would come and travel

15:39

around the world for an entire year. There's

15:42

also social rituals as well.

15:44

So you get debutante balls

15:46

and very elaborate rites

15:49

of passage that are conspicuous

15:52

consumption and conspicuous leisure.

15:54

The importance of conspicuous consumption is

15:57

in this industrial age, the

15:59

goods that they use to demonstrate

16:01

their status are continuously becoming

16:03

cheaper because of mass production.

16:06

And this creates a dynamic sense of

16:08

consumption. What such as? Well,

16:11

for example, watches. You know, a watch would

16:13

be something that a very wealthy person would

16:15

have and over that period of time they

16:17

become cheaper and cheaper and cheaper. The

16:19

middle class can now afford them so they

16:21

no longer distinguish the middle class from the

16:23

upper class. Eventually you get

16:25

cheap enough watches that working people have

16:28

them. So they no longer

16:30

distinguish and the very wealthy come

16:32

up with other things. Very

16:34

expensive pens. Second homes.

16:37

All sorts of things that they can consume

16:40

that are not available to ordinary working people

16:42

or middle class people in the United States.

16:44

There's a phrase that

16:46

Matthew Watson called peculiarly emulation.

16:49

Can you tell the listeners what that

16:51

means and what it implies? I can

16:53

certainly try. A faith

16:56

in thought that America had

16:58

reinvented itself as a pecuniary culture

17:01

in which the value of

17:04

everything, the value of

17:06

people, the value of possessions, the

17:08

value of memories, the value

17:10

of anything you can think of was

17:13

to be judged in purely monetary

17:15

terms. And

17:17

the surest route to ascendancy in a social

17:19

structure of this nature was

17:21

to show that you could replicate

17:23

the spending patterns of those people

17:26

who otherwise might be treated as

17:28

your social superiors, whether by birth

17:30

or profession or something of that

17:32

nature. So that it's basic,

17:35

therefore, pecuniary emulation is simply

17:37

keeping up with the Joneses. But

17:40

doing it to be able to demonstrate

17:42

that the Joneses are not out of

17:44

your league when it comes to spending

17:46

capacity. And they even talked about

17:49

the necessary visibility

17:51

of payment in this regard,

17:54

always demonstrating the ability to

17:56

pay and in particular

17:58

paying for may be frivolous

18:01

acts of consumption rather than something

18:03

that made a material difference to

18:05

people's lives. It was not only

18:07

to make social advance though, everyone

18:10

is now looking at their peers

18:13

and making sure that they fit in

18:15

with their social reference group and hopefully

18:17

moving to another one. But

18:19

the worst thing you could do is not keep up.

18:22

You could fall in status by not

18:24

being able to replicate the

18:26

consumption patterns of your current status group

18:29

and you could only move up if you could replicate

18:32

it of another income group above you. Does it

18:34

seem curious to you that this in America learned

18:36

of the free inequality you preserve access to this?

18:40

Does it surprise me? No. But

18:43

I think that manufacturing and the

18:45

fact that we could rapidly manufacture

18:47

new goods quickly was

18:50

going to make this whole process

18:52

very, very dynamic. And

18:54

a lot of waste would be the result

18:56

of it. Our societies have their founding myths

18:59

of course. So maybe if we

19:01

look at America as the land of the free

19:03

and of equality as a founding

19:05

myth, the myth itself covers up so many

19:07

of the social practices

19:09

of conspicuous consumption. It

19:12

covers up all of those downsides of

19:14

the pecuniary culture in which

19:17

someone else's misfortune becomes a

19:19

measure of your recognition of

19:21

your own self-worth. But you

19:23

can get off on the terrible things that

19:25

happen to other people when

19:27

that leads to unmet needs where

19:30

you can out-trump those with

19:32

the sort of spending that you're engaged in. I

19:35

think that's a critical point. Yeah, absolutely.

19:37

One of the core founding myths of

19:39

the United States is that of the

19:41

self-made individual. And

19:44

so along with that myth

19:46

of self-maideness is the

19:48

idea that if you are

19:50

wealthy and successful, it is because

19:52

you work hard, you have ambition,

19:54

you're intelligent, but if you are

19:57

not financially successful, then you

19:59

are a failure. failure, you as an

20:01

individual have failed. And

20:03

so conspicuous consumption is not just

20:07

about demonstrating financial prowess,

20:09

it's also about demonstrating

20:11

reputability. So it

20:14

becomes a sign of character as

20:16

well as wealth. What

20:19

to fail in was some

20:21

of the unattractive consequences of

20:23

conspicuous consumption? Waste

20:26

was the largest one. He made a

20:28

distinction between consumption that was serviceable, contributing

20:31

to the generic means of life,

20:33

versus waste, where it was simply

20:35

for demonstration purposes. It was

20:37

simply to show the community,

20:40

to illustrate to the community your

20:42

capacity to purchase items

20:45

simply because you wanted them. Such as?

20:48

Townhouses in New York and farms

20:50

in the countryside, engaging

20:53

in sporting events that you can

20:55

demonstrate your prowess, which took a

20:57

tremendous amount of skill to participate

21:00

in, but were largely

21:02

ridiculous. Polo became popular, for example,

21:04

where you have to have three

21:06

ponies and years of training on

21:08

the back of a horse to

21:10

hit a little ball with a

21:12

mallet. And you can't

21:15

do that as a working person.

21:17

You can't afford the prerequisites to

21:19

participate in that activity. Sailing was

21:22

another one. Very expensive boats, very

21:24

time consuming to learn how to

21:26

do it, required a lot of

21:28

expensive appliances, and was totally

21:30

out of the reach of working people. Well, a

21:32

lot of people would value these in themselves. And

21:34

some of the things you said they might increase

21:36

in value. The boat you bought might increase in

21:39

value, and so on and so forth. Why was

21:41

this so against all this? Well,

21:44

that meant that productive capacity was

21:46

being used to produce things that

21:48

were inessential in terms

21:50

of the generic means of life,

21:52

meaning that that productive activity was

21:55

not turned towards dealing with the

21:57

needs of the larger population. to

22:00

be essential? No, the arts certainly

22:03

don't need to be essential and our lives

22:05

are enriched by them and

22:07

that was also a part of this

22:09

system but a lot of the things

22:11

were just purely wasteful. And

22:14

he attacked waste for every sort really didn't he?

22:18

Pretty much but not

22:20

in completely consistently. He had

22:23

access to funds, his family had access

22:25

to funds later on and they

22:28

had a vacation home in Washington Island.

22:30

He traveled to Europe regularly. He was

22:32

picky about his clothing on occasion but

22:35

not others. He had

22:37

a brownstone in New York City when he was

22:39

at the New School for Social Research which was

22:41

where he earned his greatest amount of money as

22:43

an academic. So it isn't

22:46

that he was against these things he

22:48

was against it as a social movement

22:50

and a social measure of value that

22:53

people would be judged by and could

22:55

distract us from producing things that were

22:57

absolutely necessary. Absolutely. Veblen wrote

22:59

the theory of the leisure class

23:02

in order to provide

23:04

a counter theory to the

23:06

theory of utility that was

23:08

coming to dominate the economics

23:10

discipline and the theory of

23:12

utility says that consumption is based on

23:15

usefulness that people will spend according

23:17

to the usefulness how

23:19

useful a particular product is and

23:22

Veblen said no. Actually

23:24

people will buy yes for

23:26

usefulness but they also engage

23:29

in conspicuous consumption in order

23:31

to signal their social standing

23:33

and this is where he

23:36

talked about consumption conspicuous consumption

23:38

as wasteful. When

23:40

he used the word wasteful he meant

23:42

it very specifically to refer to non-productive

23:45

so it didn't contribute to

23:47

the household, it didn't contribute

23:49

to the individual, it didn't

23:51

contribute to the community, it

23:53

was expenditure that was for

23:55

show for signaling only and

23:58

he wanted to juxtapose. because

24:00

that against, counter against

24:03

the utility theory that was

24:05

becoming part of the

24:07

mainstream in economics. I mean you could disagree

24:09

with them couldn't you? You could say collecting

24:11

art seems to be useless but

24:15

actually it gives great pleasure that's not

24:17

nothing and if you're looking

24:19

for the money side of it, if you bought

24:21

the right side of art it could zoom in

24:23

price so you'd make a profit and

24:26

you could say that have a lot of other things. Definitely

24:29

you could and I think

24:31

for him it would be a differentiation

24:33

between buying art to

24:35

showcase your ability to

24:38

purchase it rather than as

24:40

an investment per se. Nothing's

24:43

changed then. Pretty

24:46

much nothing has changed. Thank you. Was

24:49

he proposing an alternative such

24:52

as socialism for instance? Cadence

24:54

politics, that's quite a tricky

24:56

one on the grounds that

24:58

he never really got round to telling

25:00

anyone exactly what his politics were. Was

25:02

that a wise or a

25:04

cunning or kind of

25:07

in carelessness? Maybe cunning

25:09

because it doesn't stop people asking does it?

25:11

And I know that his first wife was

25:13

extremely fed up about the fact that everyone

25:15

would come to her and

25:18

say is Torstein a socialist? And she

25:20

didn't know either because he hadn't bothered

25:22

sharing it with her. Probably

25:25

we need to look at the

25:27

programmatic reform that Vablen would

25:29

have recommended rather

25:31

than trying to pin a particular

25:34

political label upon him and

25:36

central to that programmatic reform was

25:38

a move to collective ownership and

25:41

he thought that this would tick

25:44

a number of boxes. For a

25:46

start it would collapse the distinction between

25:49

making goods to service needs and making

25:51

goods to service profit because under a

25:53

system of collective ownership there was no

25:56

necessary need for there to be profit

25:58

in the first place. It

26:00

would eliminate a lot of the waste. It

26:03

would stop the private owners acting

26:06

as industrials, saboteurs, undermining

26:08

the productive capacity of the

26:10

economy simply to produce profit.

26:12

So I guess naturally this brings him

26:14

close to the trade union movements

26:17

of the time and there are...

26:19

Did they feel he was coming close to them? Did

26:22

he have an influence though? I think

26:24

he had an influence on their thinking broadly,

26:28

perhaps not on their organization more

26:30

specifically because he wasn't interested in

26:33

that sort of stuff. No. Veblen

26:35

was incredibly pessimistic about social change,

26:37

which may be why he didn't develop

26:40

a political program. At the

26:42

end of his second major book, he talks about

26:44

the fact where, yes, organization

26:46

on the shop floor might lead

26:48

to greater productivity and a

26:50

pursuit of greater output rather than

26:53

restricting output for profits. And

26:55

he said the owners are just going to buy

26:57

off the managers. You know,

26:59

this potential for organizing is

27:02

not going to be realized. By the time he gets

27:04

to his last book, Absentee Ownership, he's

27:06

totally frustrated. He doesn't believe

27:08

that change is really going to

27:10

be very possible. He thinks we ought to

27:12

try, but he

27:14

has a very dim view

27:16

of the possibility. He at

27:18

one point says that more

27:20

civilizations have collapsed because of

27:22

imbecile institutions than have saved

27:24

themselves from dire circumstances by

27:26

social change. I mean,

27:29

he was very pessimistic, and I think

27:31

that really limited his capacity to generate

27:33

a positive program. Mary,

27:35

Mary, what impact did this

27:38

book have on the way he

27:40

was perceived? Well, he

27:42

published Theory of the Leisure Class when

27:44

he was at Chicago. And he

27:46

had already published a lot

27:48

of journal articles up to that point, but

27:50

this was his first book. And

27:53

it really solidified his standing in

27:55

the discipline. I think

27:57

he was surprised that the general public.

28:00

public bought his book

28:02

because he wrote it specifically for

28:04

the economics discipline. He was writing

28:06

in order to counter utility

28:09

theory that was in economics.

28:12

And so he was writing

28:14

for other economists. And

28:17

those other economists, they took the

28:19

work seriously. Even those who were

28:22

critical of the theory of the leisure

28:24

class, they wrote up their

28:26

critique. And they published that critique

28:28

and then Veblen would respond to that critique in

28:30

a following publication.

28:33

So they took his

28:35

ideas very seriously. And

28:38

his standing within the field rose,

28:40

his stature in the field rose. After

28:43

the publication of theory of the

28:45

leisure class, he was invited

28:47

by the AEA, the American

28:50

Economics Association, to

28:52

serve on their organizing council.

28:54

He served two consecutive three-year

28:56

terms. A few years later,

28:59

he did a series of lectures at

29:01

Harvard. Shortly after

29:03

that, he got his job at Stanford. So

29:06

the theory of the leisure class really solidified

29:08

his reputation as a serious... Hey,

29:13

it's Ryan Reynolds, owner and user of Mint

29:15

Mobile. And I am recording this message on

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will experience lower speeds. Video streams have more ADP.

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See mintmobile.com for details. A scholar. Why

29:47

do you think it was such a bestseller that it kept

29:49

him in funds for the rest of his life? The

29:52

literary community recognized the theory of the leisure

29:54

class as a major work of American writing

29:57

and so Dean Howell published a

29:59

very... two-part favorable review in

30:01

a journal of American criticism.

30:04

And as a consequence, the book

30:06

got a push into a completely

30:08

different community, as well as being

30:11

very influential in sociology in

30:13

the United States and anthropology.

30:15

So it sort of crossed

30:17

over his intended audience, which

30:19

was economists and replacing

30:23

utility as the motive for

30:25

consumption with Pecuniary emulation. It

30:28

hit a much bigger chord in

30:30

American society. Thank you, Fos. I think

30:33

we also have to take into account just

30:35

how cleverly written it is, because

30:37

he writes the theory of the

30:39

leisure class in

30:42

the vernacular, in the prose of

30:44

the leisure class. And so

30:46

it has layers to it

30:48

that, well, economists probably, it

30:50

would go over their head, but

30:53

other readers would catch on to

30:55

it. So it has an element

30:57

of satire in there as

30:59

well. And so I think that added to

31:01

its popularity, too. Yeah, there's

31:04

a definite playfulness in the text. And

31:06

I think the playfulness in the text appealed

31:08

to the literary mindset, more

31:11

than to the scientific mindset of contemporary

31:14

economists. It's always the

31:16

case that with students of mine, if

31:18

they can remember having read F. Scott

31:21

Fitzgerald's The Great Gatsby at school, I

31:23

then get them reading Veblen's theory of the

31:25

leisure class. And something clicks in their mind.

31:27

It feels familiar to them because

31:30

of that crossover into the

31:32

literary world where so

31:34

many plot lines, Fitzgerald was an

31:37

obvious one, so many plot lines seem to

31:39

follow Veblen's analytical approach. The

31:41

same is true with these Wharton's

31:43

novels about the Weiser class and

31:45

the Gilded Age. They fall very

31:48

closely in with Veblen's analysis of American

31:50

culture at that period of time. He

31:52

tended to be rude about mainstream economics

31:54

of his day. In what

31:56

way did that enhance or block our history? What

31:59

effect did it make? I

32:01

think that it alienated

32:03

the more ideologically oriented members

32:05

of the economics profession, but

32:07

the economics profession during this

32:09

time was much more pluralist than

32:11

it was today. A

32:13

lot of economists were trained in Germany, the

32:16

others in England, and only more

32:18

recently, Veblen's period in the United States, so

32:20

there was a lot more discussion

32:23

of alternative perspectives. His early

32:25

articles on the preconceptions of

32:27

economic science are brutal. They

32:30

just dissect the underlying

32:32

natural law foundations of mainstream

32:35

economics, the animistic character of

32:37

it, the imagined

32:39

tendency towards equilibrium in

32:41

every circumstance, in

32:43

which competition results. So that

32:45

certainly would have offended a certain portion

32:48

of the academic profession, and they were

32:50

divided over him, as was seen in

32:53

the politics of the profession in particular

32:55

in the American Economic Association. One

32:57

of his professors founded the American

33:00

Economic Association, but a significant portion of

33:02

the membership would have rejected Veblen as

33:04

a member of the profession.

33:07

Was the pursuit of economics and

33:09

the stuff of economics changing at this time?

33:13

Yeah, very much so. Most

33:16

of the academic literature caused

33:18

it a process of professionalization,

33:20

and that economics was trying

33:23

to reinvent itself as

33:25

a singular science, to operate in

33:27

the same way that other scientific

33:30

subject fields do, to try to

33:32

identify a core theoretical

33:34

set of statements, and to build

33:36

everything up on more or less

33:39

formal modelling on that basis. And

33:42

Veblen's approach to economics really couldn't be

33:44

any more different. But I think it's

33:46

important not to just focus on his

33:48

critique in the theory of the leisure

33:50

class. When we teach economics,

33:52

the first place we start is consumption, and

33:54

the theory of the leisure class is his

33:56

alternative theory of consumption. His next book is

33:59

a theory of consumption. of Business Enterprise, which

34:01

is his attack on the theory of the

34:03

firm. His next book is The

34:05

Instinct of Workmanship, which is his attack on

34:07

production. The next book is

34:09

on development. The final book is on

34:12

property rights. Literally, the five volumes of

34:15

his major theoretical works are an

34:17

alternative system for understanding the economy.

34:19

And that, I think, was certainly

34:21

his intent, and it was driven

34:23

by a continuous

34:26

level of frustration with the unequal

34:28

distribution of wealth in society. What

34:30

effect did it have those five

34:32

volumes? Well, there's

34:36

a whole school of institutional

34:38

economics and evolutionary economics, which

34:40

considers that the foundational works of the way

34:43

we look at economics. It's

34:45

been pretty much driven underground in the

34:47

United States, but it's taught here in

34:49

England. It's taught in Brazil. It's

34:52

taught in Mexico. It's taught in Italy. It's

34:54

taught in Germany. In

34:56

significant numbers, where there is

34:58

pluralism in economics, institutional economics

35:01

survives. Matthew, I think

35:03

the effects of Veblen's alternative agenda

35:06

are important to the extent that they

35:08

cannot be enclosed within

35:10

economics and within economic theory.

35:13

And here we see the big

35:15

divide. I think economists trying to

35:18

develop economic science were writing about

35:20

quintessentially economic things,

35:23

whereas Veblen thought that this was

35:25

to completely misunderstand the economic system.

35:28

And if we look at the way in

35:31

which he brings that critique together through

35:33

the five books, there

35:35

is an account that could still

35:37

be intensely relevant today. I think

35:39

there's an account of the way

35:41

in which social change has to

35:43

pass through all of these different

35:45

aspects of the economy, at the

35:47

same time as changing the people

35:49

who are members of that economic

35:51

system, changing the way that

35:53

they relate to the world

35:55

around them, changing the way that they relate to

35:58

other people around them. And

36:00

aren't these the big political questions

36:02

of today? Aren't

36:04

all of those political questions of today

36:07

all about whether the economic system that

36:09

we have, whether it's up to the

36:11

task, whether it can take

36:13

us to where we want to go if we

36:16

know where that is. As

36:19

you got older, did you become more moderate?

36:23

I think he became more

36:26

like a caricature of himself, more belligerent

36:29

in a lot of his personal

36:32

characteristics that fed through

36:35

into some of his writing. Now

36:37

I don't think he moderated at all. I

36:40

think that the level of frustration that

36:42

he had, that his earlier

36:44

work had been lauded, celebrated,

36:48

but not actively worked

36:50

into economic theory, just

36:53

led to more general frustration with

36:56

the nature of academic discourse and a more

36:58

belligerent attitude towards it. Maryam,

37:01

what did his followers do next? Well

37:05

Veblen died in early

37:07

August 1929 and at

37:09

the end of October of that same year we

37:11

get the Great Crash. And

37:14

that Great Stock Market

37:16

Crash amplifies the

37:18

Depressionary period in the United States and

37:21

we get the Great Depression. And

37:24

so I think following on

37:26

Veblen's death, seeing the Great Crash,

37:28

a lot of his students, his

37:31

followers, his admirers in the discipline,

37:35

Veblen must have looked incredibly

37:37

prescient because this was all

37:39

part of what he would have predicted. And

37:42

many of his followers, his students became

37:45

involved once FDR was

37:48

elected into office. He

37:50

wiped out all of the economic

37:52

advisors that have been part of the

37:54

Hoover administration and all of

37:57

the economists that he brought in were admirers

37:59

of the Obama administration. of Thorsten Beblin or

38:01

some of his students. And

38:03

so they played a very active role

38:05

in the construction of the New Deal

38:08

and sort of solidified his

38:11

importance in the policy arena

38:13

along with another institutionalist, John

38:16

R. Commons out of

38:18

Wisconsin. And after that, his tradition,

38:23

their involvement in the New Deal,

38:26

especially throughout the interwar period, meant

38:28

that institutionalists paid less attention to

38:30

what was happening in academia. And

38:33

so institutionalists were squeezed out of

38:36

higher education by and

38:39

large, they became more marginalized. But

38:42

since the post World War

38:45

II period, institutionalism has continued

38:47

to survive and

38:50

has followers today, people who are

38:52

working in that same tradition. Are

38:54

you a follower Bill? I hope that I'm

38:56

a contributor. No,

39:00

Beblin wouldn't want a follower in the

39:02

sense of narrating exactly what he said

39:04

because he was focused on the way

39:07

culture changes through institutional change. And

39:09

of course, the institutional and cultural structure we're in

39:11

today is very, very different than in his time.

39:14

Again, nobody knows which direction culture will

39:16

evolve. We try and solve our problems

39:18

if we can. And

39:20

if we don't solve our problems, then

39:23

things just get worse. And I think

39:25

that's Beblin's fundamental pessimism. Could

39:27

you describe his legacy? Is there a legacy

39:29

you can describe? Yes. First

39:32

of all, looking at the economy as

39:34

an open cultural system, rather

39:36

than the simple summation of

39:39

individuals, choices and actions. The

39:42

focus on trying to formulate

39:44

sensible public policy. Many,

39:46

many of Beblin's followers even today

39:49

work in government agencies rather than

39:51

in the academy, trying

39:53

to formulate policy. And

39:56

it's pragmatic problem solving, which I think

39:58

is his biggest legacy. in the

40:00

legacy of institutional... Is it a positive legacy?

40:03

Yes, I think it is. I think

40:05

the New Deal was the implementation of the

40:08

welfare state in the United States and possibly

40:10

the most successful policy program the country's

40:12

ever had. Matthew, do you want to come

40:14

in here? Yeah, I think his legacy is

40:17

almost one of a mindset. It's the

40:19

mindset towards critique. It's the

40:22

mindset towards challenging those

40:24

things that other people will tell

40:26

you are normal and of

40:28

trying to historicize those

40:30

cultural attributes and to show how

40:33

specific they are to

40:35

the society that we live in.

40:37

Vablen thought that his own society

40:40

was an historical aberration and

40:42

that it was the only

40:44

society in history that

40:46

had managed to turn people

40:48

against what he saw was

40:50

the natural human disposition to

40:52

cooperate. He spent his

40:55

life trying to understand those

40:57

social institutions, those cultural practices

41:00

that got in the way of cooperation

41:02

and I think we can learn a lot

41:05

about that still today. What

41:07

were those cultural practices? The

41:09

cultural practices that are focused

41:11

on a pecuniary society. Thinking

41:14

of recognition of self-worth

41:16

in terms of status

41:19

seeking, thinking about our

41:21

own moral lives in terms

41:23

of possessions and in terms of

41:26

ability to pay. I think

41:28

if you read any of

41:30

his major work, Theory of the

41:32

Leisure Class, Higher Learning

41:35

in America, you're

41:37

going to see distinct

41:39

parallels that are relevant today.

41:43

Maybe there are different

41:45

expressions of the

41:47

behaviors that he was describing

41:49

but that underlying imperative

41:51

that he talked about,

41:54

the underlying theory is

41:56

still incredibly relevant and

41:58

incredibly obvious. today, I

42:00

would say. So I think

42:02

his legacy is pretty secure as long as we

42:05

are in our current

42:07

economic system. So to summarize before

42:09

we leave this program. I

42:11

would say that profit as a

42:13

motive is going to lead to

42:16

waste, whether it is in higher

42:19

ed, whether it is in the

42:21

general community, whether it

42:23

is in particular products that are produced,

42:26

and by waste I mean it doesn't

42:28

contribute to making people's lives easier,

42:31

better, healthier, and

42:33

so forth. Bill? I

42:37

think that looking

42:39

at Bevlin's work, the problems

42:41

he identified have simply been amplified

42:44

since his time, that

42:47

the absurd practices grow to greater

42:49

levels of absurdity. A simple example

42:51

is the role of sports in

42:54

higher education in the United States.

42:57

In almost all 50 states,

42:59

the highest paid state employee

43:01

is a football or basketball

43:03

coach. More

43:05

than the governors, more than any of

43:08

the faculty, any of the faculty

43:11

administrators, football coaches,

43:14

basketball coaches are the highest

43:16

compensated people in higher education

43:19

and in their respective states, which

43:21

is an absurdity. Well

43:24

thank you all very much. Thanks

43:26

Mary Wren, Matthew Watson and Bill

43:28

Waller, and our studio engineer Jackie

43:30

Marjoram. Thank you. Next week,

43:32

Marie de Navarre, the woman at the

43:34

heart of French culture in the early

43:37

16th century. Thank you for listening. And

43:40

the In Our Time podcast gets some extra

43:42

time now with a few minutes of bonus

43:44

material from Melvin and his guests. What

43:46

would you like to have said that you didn't get a chance to say?

43:49

I think what I

43:51

would have liked to have

43:53

talked about is something

43:56

that Bill brought up, that

43:58

Veblen would not have said. have wanted

44:00

followers. He wouldn't want some

44:03

anybody who is holding him up

44:05

as a hero. And that

44:08

I think is really

44:11

representative of his approach

44:13

to the study

44:16

of economics. He thought

44:18

that economics

44:20

should be evolutionary in and

44:23

of itself. He

44:25

wrote a very famous article in 1898 called Why Economics is Not

44:31

an Evolutionary Science.

44:33

And he's right. If

44:35

you look at the writings at

44:37

the end of the 19th century

44:39

in economics and you look at

44:41

undergraduate economics textbooks today, there's not

44:43

a lot of difference between them.

44:46

And Veblen was very much of

44:49

the idea that economics has to change,

44:51

that it has to evolve. Why?

44:55

Because it's not a science if it

44:57

doesn't. Because if it

44:59

sticks to the same theoretical

45:01

frameworks and doesn't update itself

45:03

for historical context, it doesn't

45:06

change based on the

45:09

location, what country

45:11

it is in, the cultural practices,

45:13

the social relationships of that country,

45:15

then it becomes irrelevant. Bill

45:18

said that the Middle Ages had the

45:20

same economic system for a thousand years. Why does

45:22

that take us? Well, because

45:24

position in that those societies were

45:26

determined by birth and the divine

45:29

right of those people to

45:31

have control over it, there was

45:33

no social mobility of any

45:35

significance during that period of time.

45:38

What you get in the Gilded

45:40

Age and with industrialization is a new

45:42

emergent class, the bourgeoisie in Marx's terms.

45:45

And that created a dynamic, pecuniary

45:47

standard of living that because of

45:50

mass production was always going to create

45:52

new items for the leisure class, which

45:55

would slowly trickle down to Lower

45:58

levels of income, that would require the your

46:00

plaza find something new or. To

46:03

distinguish himself so made it much

46:05

more dynamic and on. There are

46:07

certain consequences of this that are

46:09

not. On. For in

46:11

the sense that by the Nineteen

46:13

fifties certainly the American economy was

46:15

no longer troubled by scarcity, was

46:17

troubled mind distribution. So you get

46:19

Galbraith a flap John can com

46:21

brace off Our vet ones are

46:23

a good student of Babylon says

46:25

who writes the a Fluent Society

46:27

and says the problem is no

46:29

longer on production, it's distribution but

46:31

we now known as production in

46:33

on itself problem. In terms of

46:35

the environment we obviously have the

46:37

author that system we can produce

46:39

endless. Amounts of eve goods

46:41

that people don't use and just accumulate

46:43

in their garages. And at X we

46:45

have to take into account the chant,

46:47

the and changes as has had on

46:50

the environment recent. Fundamental. Service.

46:53

Ability is and the economy and it's

46:55

gonna be consuming a lot less and.

46:57

We can't do that

46:59

until we examined seriously, the

47:01

culture of consumption itself, until

47:04

we understand conspicuous consumption as

47:06

a social practice. Through

47:10

the commit yeah I think this

47:12

is a really interesting discussion because

47:14

say who so links to and

47:16

savings be with technology more generally

47:18

I'm and I think on many

47:20

occasions he had a rose tinted

47:22

few with technology I'm at that

47:24

you build the machines. And

47:26

the machines with an appeal to

47:28

kill all social ills, an under

47:30

consumption can be a thing as

47:32

a post poverty can be a

47:35

thing of the past. Inequality can

47:37

be the thing of the past

47:39

and as long as at the

47:41

machine process of the logic of

47:43

the machine process has he called

47:45

it was allowed to win out

47:47

and that rose tinted few of

47:50

technology I think sometimes also falls

47:52

over and say I'm a similarly

47:54

romantic view, it's the heroic potential.

47:56

of workers because it's workers the stand

47:58

by the machine six workers who

48:01

can, he says, identify the

48:05

potential of the machine process

48:07

to have all of these

48:09

really positive social effects of

48:12

curing all of these social

48:14

ills. But the workers suffer

48:16

the indignity of having

48:18

some sort of factory foreman come round and

48:21

turn down the productive capacity of the

48:23

machines that they're working on because

48:26

that is the level at

48:28

which more private profit can

48:30

be made. So

48:32

it's fascinating how production

48:37

and underconsumption work

48:40

hand in hand with overproduction

48:43

and the liberation of the

48:45

workers, which if we put that in

48:47

the context of the discussion that we're having about

48:49

today, doesn't

48:52

seem right, does it? You're absolutely correct.

48:54

You're absolutely correct. Keynes made the same

48:56

kind of arguments if we could only

48:58

expand production that would solve our social

49:00

ills. And they

49:03

never really took into consideration the

49:06

carrying capacity of the environment to

49:08

tolerate that kind of production

49:11

process and the side effects of

49:14

it on the environment. So we

49:17

can't be Vemlinians in that sense. We

49:19

have to rethink what it

49:21

means to have a decent society that

49:24

our children can live in. And

49:26

this has just

49:28

become very personal for me since my

49:31

grandchildren have arrived. It's like you

49:33

project into the future much farther. And

49:36

John, our comments talked about the

49:39

essentials of having a sense

49:41

of futurity. And I think the

49:45

concerns with scarcity drove

49:47

many economists, maybe all

49:49

economists, to

49:51

forget that. That in fact, you

49:54

have to project what we're doing into the

49:56

future and examine what the potential consequences are

49:59

as well as I do. identifying the current problems and trying

50:01

to solve them. So you think the future is

50:03

scarcity? Not

50:06

necessarily scarcity, but certainly a much more

50:08

constrained level of consumption that is going

50:11

to have to be more thoughtful. I

50:14

don't want to get rid of the arts, I

50:16

don't want to get rid of leisure time, but

50:19

I think that we need to transform the way

50:21

we think of consuming.

50:24

Yeah. And chances are it's

50:27

also going to have implications for the

50:29

size of the population. I don't think

50:31

we can simply continue to exploit

50:34

resources at the rate we are or in the

50:36

way we are. Well you

50:38

say we, who do you mean, the western world? The human

50:40

race. The human race, yeah. Yeah. And

50:42

we've turned full circle there haven't we? We're back to

50:45

the tension between overproduction

50:47

and inequality. That

50:49

overproduction is a means of

50:52

solving inequality, but overproduction itself

50:54

produces more social problems further

50:57

down the line. So

50:59

transformation within productive

51:02

practices is almost certainly going

51:04

to be the way forward in this regard.

51:07

I know that lots of politicians talk

51:09

about a green transition and a green

51:11

new deal. And

51:14

those new practices are possible,

51:17

they're feasible. A

51:19

lot of the technology is

51:21

already with us, that technology

51:23

needs to be facilitated though.

51:27

And if that means operating

51:29

within a different structure

51:31

of subsidies that

51:34

can be thought of globally as well

51:36

as nationally, then that

51:38

might possibly be a route to

51:41

somewhere that looks like planetary habitability,

51:44

I think that's the word, for

51:47

the future. Of course we are

51:49

limited by the economics discipline refusing

51:51

to evolve, which was Beblin's original

51:53

point that economics has to continually

51:56

update itself and has

51:58

to continually adapt. Progressive

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