Economic Waste and Social Provisioning: Veblen and Keynes on the Wealth Effect

Economic waste stems from the abuse of power that interferes with the process of social provisioning. For Thorstein Veblen, waste stems from individual efforts to show superiority, corporate efforts to increase pecuniary returns without increasing industry, or national efforts to exert military dominance. For John Maynard Keynes, waste assumes the form of idle factories, unemployed workers, and unsold goods resulting from insufficient demand. From a broader perspective, waste results from the efforts of rentiers to increase their returns. Both dimensions of waste relate to the Fed and other central banks’ efforts to address the problem of social provisioning through the wealth effect. The ideas of Veblen and Keynes provide guidance for evaluating policy directed at enhancing the provisioning process. Based on Veblen’s ideas, policies should promote the life process and not conspicuous consumption. Based on Keynes ideas, policies should stimulate demand, increasing profits and, in turn, creating jobs.