Thorstein Veblen (1857-1929) was an American economist famous in the history of modern economic thought. He claimed that, under certain circumstances, when the price of an item increases, its value in people's mind also increases.
Veblen combined a Darwinian evolutionary perspective with his new institutionalist approach to economic analysis. He combined sociology with economics in his masterpiece, The Theory of the Leisure Class (1899), arguing there was a basic distinction between the productiveness of "industry," run by engineers, which manufactures goods, and the parasitism of "business," which exists only to make profits for a leisure class. The chief activity of the leisure class was "conspicuous consumption," and their economic contribution is "waste," activity that contributes nothing to productivity. The American economy was therefore made inefficient and corrupt by the businessmen, though he never made that claim explicit. Veblen believed that technological advances were the driving force behind cultural change, but, unlike many contemporaries, he refused to connect change with progress. Although Veblen was sympathetic to government ownership, he had a low opinion of workers and the labor movement and was hostile to Marxism. As a leading intellectual of the Progressive Era, his sweeping attack on production for profit and his stress on the wasteful role of consumption for status greatly influenced liberal thinkers seeking a non-Marxist critique of capitalism. Experts complained his ideas, while brilliantly presented, were crude, gross, fuzzy, and imprecise; others complained he was a wacky eccentric. Scholars continue to debate exactly what he meant in his convoluted, ironic and satiric essays; he made heavy use of examples of primitive societies, but many examples were pure invention. 
Thorstein Veblen was the uncle of Oswald Veblen.
Veblen was born on July 30, 1857, in Cato, Wisconsin, to Thomas and Kari Veblen, farmers who emigrated from Norway in 1847. They moved to Nerstrand, Minnesota, in 1865. These settlements were little Norways, oriented around the religious and cultural traditions of the old country . He broke away by attending a Yankee school, Carleton College Academy (now Carleton College) in Northfield, Minnesota; he was lucky to study with young John Bates Clark (1847-1938), who later became the nation’s foremost economist. After graduation in 1880 Veblen taught a year at a Lutheran academy, tried the new Johns Hopkins University, then attended Yale University, taking a PhD in philosophy in 1884, with a dissertation on "Ethical Grounds of a Doctrine of Retribution." He was a student pf Noah Porter (1811-1892) and William Graham Sumner (1840-1910). Veblen married Ellen Rolfe in 1888; it was a hateful marriage that finally ended in divorce in 1911.
In 1891 after years of working on the farm he finally obtained his first academic appointment at the new University of Chicago, which overnight became a world class university in many fields. He was promoted to assistant professor in 1900 and edited the prestigious Journal of Political Economy, while conversing with such intellectuals as John Dewey, Jane Addams and Franz Boas. He published two of his best known books, The Theory of the Leisure Class (1899), and The Theory of Business Enterprise (1904). The books made him famous overnight for their ridicule of businessmen.
A difficult colleague to get along with, in 1906 Veblen went to Stanford University and in 1910 to the University of Missouri. He published The Instinct of Workmanship in 1914; it was his most ambitious work, but it lacked the satire and ridicule that made his other books best-sellers. Imperial Germany and the Industrial Revolution (1915) argued that Germany's strength lay in the fact that she borrowed the industrial techniques from England but instead of borrowing the English democratic procedure she combined them with the unqualified feudal-militaristic institutions congenial to business, In An Inquiry into the Nature of Peace and the Terms of its Perpetuation (1917) he argued that patriotism and business enterprise were useless to the community at large, portraying them as the principal obstructions to a lasting peace. In 1918 he served with Herbert Hoover's Food Administration, and published The Higher Learning in America, a scathing critique of business' influences upon universities. Veblen assailed the porous boundaries between academia and business and condemned university intrusion into faculty privacy. Trapped in a loveless marriage to his first wife, Ellen, who refused him a divorce, Veblen himself crossed boundaries by having affairs, which ultimately led to his dismissal from both the University of Chicago and Stanford University when Ellen went public with the affairs. Veblen transformed this invasion of his privacy into an exposé of the research university. His overstepping of boundaries and the conspicuous interventions of his spouse provided the raw material for one of the most perceptive analyses of the modern university, ironically proving, contrary to what Veblen believed, that personal experience can provide powerful generalizations.
In 1918 and 1919 Veblen published essays and editorials in a radical weekly, The Dial, reprinted in The Vested Interests and the Common Man (1919). In The Engineers and the Price System (1921) Veblen examined the role and goals of engineers at the turn of the 20th century. They mainly focused on standardization of industrial processes, and were leaders of the Efficiency Movement. Often they were torn between their engineering principles of achieving high-quality, low-cost products and their responsibility to their employers who sabotaged economic progress in hopes of making ever larger profits. The last chapter sketched out a possible revolution through the coming to power of an organized “Soviet of Technicians” who could reorder priorities for greatest efficiency, turning the economy away from profit-seeking and toward production for the nation's common good. It sold poorly because Veblen was no longer hiding his meaning behind elaborate analogies (most of them based on his imagination rather than research); his irony was now soaked in vitriol that annoyed his more genteel followers. From 1920 to 1922 he taught at the New School for Social Research in New York, and in 1923 he published his last major work, Absentee Ownership. In 1925 he rejected nomination as president of the American Economic Association, made after considerable opposition from within the organization, because, "They didn't offer it to me when I needed it." He spent his last years in a cabin in the California hills.
Contributions to Economics
Veblen was an early exponent of institutionalism--the approach to economics that places prime emphasis on historically specific patterns of social behavior, or institutions. Thus, in The Theory of the Leisure Class, he contended that under the unequal social structure created by capitalism, consumer behavior was not based, as neoclassical theory assumed, from atomistically individual valuations of available goods ranked in terms of the "utility" to be derived from their consumption. Rather, he argued that the wealthy, (the "leisure class") were primarily motivated by the drive to flaunt their privileged status through "conspicuous consumption" and "conspicuous waste." The valuations thus established, filtered down to the middle class and the working class through imitation. He spent little time discussing the working class or its needs, thereby distancing himself from the radicals of the day.
Veblen's fundamental criticism of what he called the "received economics" was that it concerned itself only with the commercial side of the modern economy and neglected its industrial and technological foundation. Arguing that monopolistic control of production greatly reduced output, he foresaw the possibility of enormous increases in production when unused resources were set to work. Believing that an artificial inflation of values was characteristic of American capitalism, he predicted a collapse similar to that which occurred in 1929.
Veblen identified two theories of wealth generation. His narrow theory was based on the industry-business dichotomy and the instincts of workmanship and pecuniary interests, while the general theory was based on a theory of positive versus negative instincts or influences. In his general theory, the positive instincts include workmanship, parental ability, and idle curiosity, which promote community and social wealth or welfare. The negative instincts or influences of pecuniary interests, emulation, and predation, on the other hand, destroy aspects of the cultural fabric and promote individualism. When the negative influences dominate over the positive instincts, the economy is at risk for depression and social dislocation. When the positive instincts dominate the negative ones, socioeconomic progress is in order, and the community is developing in a communicative and integrative fashion. And when there is some degree of relative balance between the two instincts or interests, a moderate degree of social development is in process.
In Veblen's worldview, both private property and the nation-state were institutions that not only obstructed technological advance but in modern times also threatened mankind with reversion to a second Dark Ages. Veblen was a socialist in believing that a modern industrial economy requires unified, public control. But his skepticism of political authority made him more of an anarchist who rejected the notion of party discipline.
Much of Veblen's influence was due to his inimitable literary style. He made such phrases as "conspicuous consumption" and "cultural lag" a part of the common vocabulary. He introduced the concept of Veblen goods -- goods for which the demand increased with an increase in price, because the value people associated with the good was related with its price. Wesley Clair Mitchell, Walton Hamilton, and Stuart Chase were among the economists who considered themselves Veblen's disciples. His influence reached its peak during the New Deal, through such policy makers as Rexford Guy Tugwell and Jerome Frank. His witty critiques of capitalism gained their humor as he pretended to be an anthropologist studying a strange society, an approach that influenced Sinclair Lewis' novel Babbitt (1922), Robert and Helen Lynd's social anthropology of Middletown (1929), and later inspired John Kenneth Galbraith.
- Banta, Martha. Taylored Lives: Narrative Production in the Age of Taylor, Veblen, and Ford. 1993. 431 pp.
- Brette, Olivier. "Thorstein Veblen's Theory of Institutional Change: Beyond Technological Determinism." European Journal of the History of Economic Thought 2003 10(3): 455-477. Issn: 0967-2567 Fulltext: Ebsco
- Diggins, John Patrick. Thorstein Veblen (2nd ed. 1999) excerpt and text search; the first edition was titled The Bard of Savagery: Thorstein Veblen and Modern Social Theory. (1978),
- Dorfman, Joseph. Thorstein Veblen and His America (1934), the standard biography, though it exaggerates Veblen's isolation
- Dowd, Douglas Fitzgerald. Thorstein Veblen (2000) excerpt and text search
- Eby, Clare Virginia. "Thorstein Veblen and the Rhetoric of Authority." American Quarterly 1994 46(2): 139-173. Issn: 0003-0678 Fulltext: in Jstor
- Edgell, Stephen. Veblen in Perspective: His Life and Thought. M. E. Sharpe, 2001. 207 pp.
- Hodgson, Geoffrey M. "On the Evolution of Thorstein Veblen's Evolutionary Economics." Cambridge Journal of Economics 1998 Vol. 22 Issue 4, pp. 415-432
- Knoedler, Janet and Mayhew, Anne. "Thorstein Veblen and the Engineers: a Reinterpretation." History of Political Economy 1999 31(2): 255-272. Issn: 0018-2702
- Maynard, Raymond Anthony. "Thorstein Veblen on Culture, Biology, and Evolution." PhD dissertation U. of Tennessee 2000. 290 pp. DAI 2000 61(6A): 2407-A. DA9973476 Fulltext: ProQuest Dissertations & Theses
- Shannon, Christopher Conspicuous Criticism: Tradition, the Individual and Culture in American Social Thought, from Veblen to Mills (1996) 211 pp.
- Thomas, Marty Jean. "Thorstein Veblen's Theory of Leisure as Interpreted by Veblen Scholars." PhD dissertation Pennsylvania State U. 1999. 183 pp. DAI 2000 61(1): 393-A. DA9960667 Fulltext: ProQuest Dissertations & Theses
- Tilman, Rick. Thorstein Veblen and His Critics, 1891-1963: Conservative, Liberal, and Radical Perspectives (1992)
- Wood, John Cunningham, ed. Thorstein Veblen: Critical Assessments (1991) excerpts and text search
- Yonay, Yuval P. The Struggle over the Soul of Economics: Institutionalist and Neoclassical Economists in America Between the Wars. Princeton U. Press, 1998. 290 pp.
- full text of books and article by Veblen, from McMaster University's Archive for the History of Economic Thought
- "Why is Economics Not an Evolutionary Science" The Quarterly Journal of Economics Volume 12, 1898. online edition
- The Theory of the Leisure Class: A Theory of Institutions excerpt and text search ; online edition complete
- The Theory of Business Enterprise excerpt and text search
- The Engineers and the Price System excerpt and text search
- The Higher Learning in America excerpt and text search, complete text online
- Imperial Germany and the Industrial Revolution (1918) online edition
- The Instinct of Workmanship: And the State of the Industrial Arts (1922) complete text online
- What Veblen Taught: Selected Writings of Thorstein Veblen edited by Wesley C. Mitchell; (1936) online edition
- Gary Alan Fine, "The Social Construction of Style: Thorstein Veblen's the Theory of the Leisure Class as Contested Text" Sociological Quarterly 1994 35(3): 457-472. Issn: 0038-0253
- Elizabeth Watkins Jorgensen and Henry Irvin Jorgensen. Thorstein Veblen, Victorian Firebrand. 1999
- Clare Eby, "Boundaries Lost: Thorstein Veblen, the Higher Learning in America, and the Conspicuous Spouse" Prospects 2001 26: 251-293. Issn: 0361-2333
- Phillip A. O'Hara, "Thorstein Veblen's Theory of Collective Social Wealth, Instincts and Property Relations." History of Economic Ideas 1999 7(3): 153-179. Issn: 1122-8792
- Clare Virginia Eby, "Babbitt as Veblenian Critique of Manliness." American Studies 1993 34(2): 5-23. Issn: 0026-3079