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Book Reviews

The Theory of the Leisure Class

An economics classic still bears relevance, even if it doesn’t offer much practicality for investors.

Analyst RecommendationSELL

Thorstein Veblen ranks among the patron saints of sociologists interested in economics. Indeed, sociology was just taking off as a subject in Veblen’s heyday, the early 20th century. While some economists insist he was a strictly academic economist, his work sits comfortably astride other foundational sociological titans of the era like Emile Durkheim.

Most famous for his treatise The Theory of the Leisure Class, Veblen has recently enjoyed something of a revival. (A new, magisterial biography from Charles Camic, Veblen: The Making of an Economist Who Unmade Economics, is a heavy and costly tome, though a well-composed addition to the literature on Veblen’s ideas. But the average investor, let alone average reader, doesn’t need the slog of all that detail unless so compelled.)

Veblen was a polymath at a time when economics was an enlivened subject of polymathic debate, contrary to today’s dreary mathematical dictums and rules. He’s what today they’d call “heterodox,” not an adherent to any specific school of thought, but taking as he pleases from many. His flourish with a sentence and description makes his popular work a kind of creative nonfiction, in a good way.

That artistic flair and boldness held—and continues to hold—a certain appeal. One can’t help but think all of that contributes to the romantic image of the defiant intellectual, so tortured and apart from the hoi polloi of society in his singular understanding.

Veblen’s contributions are real. Terms like “conspicuous consumption” remain in the lexicon today—he was a forerunner to our contemporary understanding that economic motivation, and ultimately behavior, needs explanation beyond mere pecuniary interest or ideas about “utility.” Veblen held that money was a mechanism to achieve social standing, and that could only be achieved by overt display to others, a “nonproductive” use of resources.

He made these observations at a ripe time: It was the era of Robber Barons and high inequality in the US—the full spectrum of the intelligentsia, academic and artist alike was ready for the message. Authors like Sinclair Lewis and Upton Sinclair took inspiration from Veblin to write books like Babbitt and The Jungle, among many others.

To this day like-minded intellectuals see him as a forerunner, and surely he was for the time. But today half the online bookstore shelves are lined with polemics against the ills of the system and, as such, Theory of the Leisure Class reads as a foundational text, rapidly showing its age.

Specifically, Veblen was among the first to utilize Darwin’s theories of evolution and apply them to economic behavior. Yet, because zeitgeists change, big chunks of his work reveal their fallacy: odd passages about genetics and how people choose to procreate show there’s wide misapprehension of certain issues and any claim to scientific rigor is long past, however scintillating the prose.

All of this makes Theory of the Leisure Class a book investors should know about but don’t need to read. There are ideas of real value here but scarcely for the practicalities of investing. Rather, I’d recommend this book to marketers: It reveals much about our preferences beyond filthy lucre. And while the book remains a disturbing Ur text revealing the unsavory parts of a society in a capitalist system (but haven’t all systems created hierarchies, ultimately?), The Theory of the Leisure Class is a critical text alone, offering no viable solutions.

Veblen died alone in Palo Alto, a semi self-imposed exile, ever refusing to take part in the system he abhorred. His isolation was helped along by one personal and marital difficulty after another. It’s hard to imagine him any the happier if he was here now, but I’d bet he’d still have fiery words for us all.