The Twilight of the Leisure Class

By Rick Bookstaber

Conspicuous leisure, conspicuous waste, conspicuous consumption. Veblen coins these terms in Theory of the Leisure Class to describe the strategies the noble and priestly classes employ to assert their status. Veblen observes that a life of leisure is the readiest evidence of the superior class, while anything having to do with the work-a-day world of earning a living is the occupation of the inferior class.

This argument does not ring true for today’s society. If someone gave you the advice, “If you want to show that you are better than everyone else, then hang around obviously doing nothing productive, and even better, waste resources.” you would think they were utterly pathetic. And the fact that it doesn’t ring true means we are different from many societies that have passed before us. We are seeing the twilight of conspicuous leisure, and of conspicuous waste and conspicuous consumption as well.

For the first two this is almost immediately evident. Leisure, conspicuous or not, is no longer viewed with envy. Late-night infomercials might depict a life on a yacht free from work and worry as the ideal end result of the various get-rich-quick schemes, but the wealthy in society no longer are a class at leisure. The “one-percenters” work for a living, and the extremely wealthy who do not work for a living instead work for philanthropy. (So maybe we can add conspicuous philanthropy to the list, though the wealthy could then fairly complain that they can’t win no matter what they do).

What goes for conspicuous leisure goes even more so for conspicuous waste. In our ecologically-conscious world, the notion of treating resources with disdain no longer signals pecuniary superiority, but rather boorishness and profligacy. Our antipathy towards waste reflects in us being more frugal in what we consume. Veblen made a tight connection between conspicuous consumption and conspicuous waste – the former almost necessarily leads to the latter, so an end to the latter cannot help but reduce the former.

For conspicuous consumption, all you have to do is look around using a perspective from the consumption and advertising over the past decades when advertising appealed to being the pride of your family and the envy of you neighbors, to projecting success and culture, to commanding respect. In the snail’s pace of social change, it wasn’t so long ago that we had the literal unveiling of the new year’s automobiles, the adding and decreasing of chrome bumpers and ornaments, the rising and falling of tail fins, with the conspicuous consumer trading in for the new model every year. Now, with the exception of a smattering of high-end goods and designer labels, advertising focuses on the qualities of function and design; how much fun you can have with the product, how it will make your life easier or make you more attractive. If it is appealing to any image, it is not the one of “If you buy this, people will see that you must be rich and important” that was so dominant in the past.

The end of the consumption arms race

The decline in conspicuous leisure knocks at least one leg out of the the relationship between tax breaks for the rich and job creation, because this relationship depends on the notion that if the rich, who are taken to be the job creators, are taxed more they will work less. But if status is evoked through work rather than leisure, then that relationship does not hold. I do not know of the empirical work that has established this link in the past, but even if it exists, I question its relevance today. It is hard for me to imagine a CEO walking away from his job because his $25 million salary payday just nets him $15 million rather than $18 million. Or for that matter not working as hard. But in any case, one reason to walk away, the prestige of conspicuous leisure, has disappeared with the changing ethos of our society.

A reduction in the demand for conspicuous consumption also has implications for the economy. A drop in conspicuous consumption, not to mention in conspicuous waste, means a reduced demand for consumption. Even more than that, it means a change in the shape of the demand curve. As Veblen points out, “if the incentive to accumulation were the want of subsistence or of physical comfort, then the aggregate economic wants of a community might conceivably be satisfied at some point in the advance of industrial efficiency; but since the struggle is substantially a race for reputability on the basis of an invidious comparison, no approach to a definitive attainment is possible”. An end to conspicuous consumption means an end to a consumption arms race where demand can never be sated. There really is only so much you can eat, wear and drive, or click and stream, so if we take the “conspicuous” out of the equation we have a society going down a much different economic path. I don’t know how much of our production was geared toward deliberate but unnecessary discrimination of products, but whatever it was it is lower now. And the higher end meant higher profit margins. As everyone makes do with the functional commodity item, then by the definition of a commodity item the profits shrink.

Add to that a reduction in conspicuous leisure, and indeed more than that, having conspicuous work be what matters, and you have both lower demand for products and more people wanting to work.

Why Veblen’s world is waning

Much of what we now demand simply does not fit in the conspicuous consumption equation. In particular, the tools of the virtual world, the iPhones and iMacs, the software and Internet, do not lend themselves to conspicuous consumption, any more than do light bulbs or electric outlets. Granted those on the lower rungs spend more of their income on the consumption of real goods than do those on the top rungs. And the share of income on goods that by nature are in limited supply, private goods, land, wine and art, even social status, is greater for the top rungs than for the lower. But for both, on the margin (and increasingly so over time ) consumption is becoming oriented more toward virtual goods – consuming YouTube videos, tweets and social networks, games and reality TV shows – and the hardware to access them. I suppose someone could come out with designer label, jewel-encrusted iPhones, but that just doesn’t seem to be the way things are heading. And how do you conspicuously consume what is out there for ready for the taking?

More important is that we now have better ways of establishing people’s positions in the social or pecuniary pecking order, for example by Googling them. And if you want to make a statement you don’t have to do it through invidious consumption of real goods, you can do it more effectively by leveraging the virtual world – YouTube, any of the various forms of social media, or a blog. Not that Gucci and Chanel are going to go out of business, but for most people that sort of status statement is becoming increasingly irrelevant. No matter what you are wearing and driving, a far better picture of you and your status is just a few clicks away. You don’t have to drive a Ferrari to let everyone know you are rich and successful. If you are driving a Ferrari, what it will convey is that you – who as everyone who cares to Google you knows is worth tons of money – must like Ferraris.

(And, in any case, is the class distinction today the one that Veblen observed, one of direct overlord and humble worker? Do people give the same deference to those who can demonstrate the ability to indiscriminately buy whatever they want, to hang around the yacht club while others are working, to waste resources without a thought? In some quarters the objective is inconspicuous consumption).

The consummation of the industrial age

This is the way the Industrial Revolution was set up: Mass production of cheap, identical goods replacing the work of the artisan. The entire point of industrialization, and what made the industrial revolution successful, was having production turn from luxury items for the rich to common-day products mass produced for the common masses.

As Mumford points out, industrialization changes what society values. The industrial society values what is new and fresh. Age goes hand-in-hand with rarity, but the industrial age puts an emphasis on the technologically advanced, the brand-new rather than on the rare. The industrial society also values conformity, (though at the same time decrying conformity and the resulting alienation of the crowd). This is because the industrial process is at its best, with the lowest cost and highest quality, when it is humming along producing many of the same product. There are those who will prefer a Rolls for other than purposes of conspicuous consumption, but even so will have to admit that any number of computer-designed, robot-welded cars rolling off the assembly line – and many cars must roll off to amortize the costs of development and production – are functionally superior. This is all the more true as we move into the technology space, to computers, phones and software, where newer and conforming products are not only better, but necessary. These are products that simply do not relate to the notions of sentimentality and well-worn comfort.

Advertising post-conspicuous consumption

Industrialization is leading to a continuing convergence between the products that are consumed by the wealthy and the common man. To generate the fodder for conspicuous consumption, advertisers and marketers have waged a valiant battle for several generations against the process of industrialization by maintaining distinctions between functionally equivalent goods. Now advertising is beginning to pick its fights elsewhere. One reason is that increasingly the medium of advertising is the Internet, either directly or because the next stop when an ad catches someone’s eye is to go to the Internet, and the Internet, and thus the ads, is more about information than about conveying status or image. Another reason is that unless the marketers try very hard, many goods are clearly going to be identical between the very rich and the not so rich. There was a time when cars were the focal point for conspicuous consumption; having a car singled out the wealthy, then having a car with chrome and fins. Now I drive an Acura TSX and so does Mark Zuckerberg. Having a refrigerator was once the province of the wealthy, now you and I can have the same kitchen appliances as an ostentatious Donald Trump – minus the gold trim.

In some areas, most notably and importantly in electronics, the push to spur conspicuous consumption has been given up without a fight. In the sphere of the Internet we are egalitarian. The wealthiest of the one-tenth of the one percent are holding the same iPhone and using the same applications as my babysitter. As I write this I am sitting in the walkout basement of my son’s house, using a computer that is identical to that of one of my former billionaire bosses. And another of my sons has a big-screen TV and sound system that is indistinguishable from his. Because we spend so much of our time on our phone and in front of out computer and TV, in the new age there is not much difference between how my son spends time versus the very rich, one in a twelve-thousand square foot mansion in Greenwich while the other is in a starter home, both sitting in the corner of some room staring into a 21” screen. So as we spend more and more of our time on the Internet and virtual world, we become accidental egalitarians. As far as this goes, and granted it has not yet gone that far, it is a commendable result for society even it is not so useful for the economy.

Taken to its end, industrialization class distinctions are revealed by conspicuous consumption. This points to the objective of industrial production: goods in the realm of common consumption become removed from social distinction. This is what Mumford meant when he stated that the machine is a communist. Products bear the same impersonal imprint. They either function or do not. There is no difference between the light bulb – or phone, or computer, or Kindle – of the common and the wealthy to signal a difference in status. The consummation of the industrial revolution, and insofar as we link the industrial revolution to capitalism, of capitalism as well, will occur when the same can be said in all areas of production.

Rick Bookstaber


Rick Bookstaber is currently working in Washington as Senior Policy Adviser to the Financial Stability Oversight Council and Senior Policy Adviser at the SEC. Before the current stint, Rick worked at Bridgewater Associates, ran the Quantitative Equity Fund at FrontPoint Partners and was in charge of risk management at Moore Capital Management. In investment banking, Rick was in charge of firm-wide risk and a member of Salomon Brothers' Risk Management Committee. Rick also spent ten years at Morgan Stanley, designing derivatives, doing proprietary trading, and concluding as the firm's first market risk manager. Rick is the author of four books and scores of articles on finance including A Demon of Our Own Design. Bookstaber received a Ph.D. in economics from MIT.