Question

Did Thorstein Veblen think that there were gluts or disequilibrium? Explain.

Answer 1

Answer : Thorstein Veblen is regarded as one of the most modern and intellectual economists. He was a Norway born American economist and an equally famous sociologist. He had several contributions to economics and its study, however, the most notable of which would be the theory of ‘conspicuous consumption’ and the idea of ‘Institutional economics’. Veblen was a severe critic of capitalism, however, he did not at all follow Marx or his ideas. Veblen was more concentrated around the idea of socialism and the powers concentrated in the hands of the richer section of the society, who usually controlled almost all of the proceedings of the socialist society. Veblen was of the view that the people’s income does not determine his livelihood or expenditure, in fact it is his consumption that drives and determines his expenditure and the over all livelihood. Veblen asserted that in a society, the comparatively richer section of the society always competes with their peers in the society and then choose the class of livelihood and their status. This results in to almost all the time additional expenditure on a product or good that it actually deserves. This directly leads to an increase in the price of the product or good in the market, which makes it difficult for the comparatively poorer section of the society to maintain their survival. He asserted that gluts were almost non-existent in the society, where the production of goods and services in a society would be much higher than its actual demand. He believed that the conspicuous consumption by the comparatively richer section of the society led to a situation where there was rampant disequilibrium in the society. This disequilibrium of prices being made to rise through conspicuous consumption, made the economy destabilized where only one section of the society can enjoy their livelihood and the poorer section of the society usually fights for their existence and survival.