Term Paper: Veblen's Argument

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Veblen's Argument

Veblen believed that "economic outcomes are shaped in large part by social institutions, which introduce other motivations into human activity" (JRank, no date). This contradicts the view that markets direct self-interest towards societal norms. Veblen viewed the relationship between the markets and human motivations as the reverse. His views derived from the convergence of economics with sociology, wherein he viewed the latter as being a key driver of the former, not vice versa.

For Veblen, behavior is individually and socially determined. The factors that influence this behavior change over time through the evolution of social institutions. These institutions are the primary driver of consumer behavior. They set the market by driving demand. Veblen proposed that conspicuous consumption was driven by social settings and the desire of consumers to impress each other and gain social status. This behavior, he noted, was irrational. There was no causal linkage between the market and conspicuous consumption. The market, therefore, is at best a partial determinant of consumer behavior.

For consumers, the market lacked relevance. More important were the social institutions and constructs that guided their lives. It was social institutions that defined one's standing in society, and that consumers typically behaved in a manner that would improve their standing in society. The markets -- outcomes -- are the result of his activity. The causal relationship to Veblen worked the other way from consumers to the market, not the other way around as the argument that the market directs self-interest towards societal interest holds. For that argument to hold true, the market would have to dictate the terms of social mobility and create the social institutions. Veblen did not see this as… [END OF PREVIEW]

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