Thorstein VEBLEN, a founder of institutional economics, was
an early critic of the "marginalism" at the heart of
traditional theory: Standard economics emphasizes choice, which seems
grounded in a philosophic concept of free will. But
mathematical models of choice appear inconsistent with any meaningful freedom
to choose. Most institutionalists join some other critics of
conventional economic theory by doubting that people are unfailingly rational
and calculating. Veblen, a first
generation Norwegian-American and world-class
oddball, was born on his parents’ farm in Wisconsin shortly before the Civil
War. A child prodigy, he read book after book in a dark attic, leaving all
chores to his siblings. Thorstein’s lifelong knack
for bluffing helped him invent mazes of plausible facts while detailing
answers to all sorts of questions from his brothers and sisters. Recognizing
his intellect, Thorstein’s parents shipped him off
to Carleton College, where he wrote on such topics as "A Plea for
Cannibalism" and "An Apology for a Toper." The faculty soon
classified him a brilliant misfit," an apt one-line summary for his
entire life. After earning a doctorate
in philosophy at Carleton, Veblen unsuccessfully set out to be an academic.
After he finally secured a position at Monoma
Academy, it shut down permanently the next year. He proceeded to study at
Yale, receiving his Ph.D. in economics in 1884, but then malaria forced him
to return home to recuperate. For seven years he did
little but read books and loaf. His brother later wrote, "Thorstein was
the only loafer in a highly respectable community. He read and loafed, and
the next day he loafed and read." Even Veblen’s relationship with his
wife, Ellen Rolfe, reflected psychological isolation from the rest of the
world. Mood swings (for Thorstein) and frustration (for Ellen) followed their
eventual marriage in 1888. At 34, Veblen had never
held a job for more than a few months, despite two doctoral degrees. His
family, dismayed, pushed him to reenter academia. He chose Cornell. Arriving
in a coonskin cap in 1891, he entered the office of the prominent economist
J. Laurence Laughlin and announced "I am
Thorstein Veblen." Laughlin, an apparent masochist, made Veblen his
protégé and, together, they joined the faculty of the newly-opened
University of Chicago the following year. Veblen, whose lectures were a mix
of ramble and mumble, deserved his bizarre reputation. All students,
regardless of attendance or performance, received "C" grades, but
when one fellow protested that anything below an "A" would kill his
eligibility for a Rhodes Scholarship, Veblen acquiesced without much fuss.
His focus was elsewhere. Thorstein Veblen
scrutinized economic behavior, not through the lenses of classical
economists, but through a unique perspective on human nature itself. He saw
some societies having a superstructure of the idle rich, whose lives revolved
around consumption. He called them the leisure class. But
some pre-industrial societies seemed to lack a leisure class.
Veblen asked a classic question: "Why?" He summarized his answers in The Theory of the Leisure Class (1899), his most famous work. Just as Veblen’s views on social and economic behavior were, to understate the point, unique, his writings were curious blends of eccentricity and erudition. Consider a passage critiquing then standard economic theories of consumer demand: The hedonistic conception of man is that of a lightning calculator of pleasures and pains, who oscillates like a homogeneous globule of desire ... under the impulse of stimuli that shift him about the area but leave him intact ... He is an isolated, definitive human datum, in stable equilibrium except for the buffets of the impinging forces that displace him in one direction or another ... When the force of the impact is spent, he comes to rest, a self-contained globule of desire as before. Veblen coined the phrase
"conspicuous consumption" to describe the hallmark of the endeavors
of the leisure class, their competition for social status through material
goods. Unlike those who see
satisfaction from hard work well done as inherent in human nature, Veblen
emphasized a darker side of the human animal; the predator. In a later book, The
Theory of Business Enterprise, he argued that a fundamental conflict
exists between productive people who use machines, whom he categorized as
engineers, and people who make, not goods, but only money – businessmen. While engineers strive for efficiency and
product quality, business people seek short-term profits, often times at the
expense of progress or other people. Veblen lacked tact,
seldom bathed, and was extraordinarily homely. He claimed to have invented an
automatic dishwasher when he dumped his dirty dishes in a rain barrel and
sprayed them with a garden hose every week or so. Nevertheless, some women
apparently found his charms irresistible. An affair with Laughlin’s wife left
Veblen without a sponsor, and he left the University of Chicago for a series
of short stints at several other schools. These
appointments were marred by bitter fights with many of his colleagues and
sordid affairs with their spouses. He died broke at 72, filling a slot
as a visiting assistant professor at the University of Missouri. Many critics of capitalism still find Veblen’s ideas attractive. In this view, just as the Rockefellers, Morgans, and Harrimans once seemed to rule the business world and manipulate it accordingly, corporate America still celebrates the predator spirit. As examples, these critics cite such facts as tobacco companies arguing that nicotine is neither addictive nor harmful. Or stock brokers being paid, not based on earnings to their investors, but instead, on how many trades they make per day. Or oil companies, accused of ravaging the environment and consumers’ pocketbooks while buying and burying patents for efficient solar energy. And the list goes on and on. |
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Author:
Ralph Byrns |
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Economics
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