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Thorstein Veblen on Consumption and Unemployment

Author

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  • Forges Davanzati, Guglielmo

    () (Università del Salento)

Abstract

The aim of this paper is to analyse the effects of an increase of consumption on the part of the “leisure class” on the level of employment in a Veblenian theoretical perspective. It will be shown that an exogenous increase in the income of the leisure class determines an increase in the demand for luxury goods and hence an increase in the demand for labour in that sector. Consequently employment in the sector producing wage goods declines, as does the production of wage goods. Firms as a whole have fewer wage goods for the payment of workers and, since the unitary wage is fixed at the subsistence level, this produces a reduction in the demand for labour in both sectors. Therefore, the higher the rent/wage ratio, the higher the unemployment. It is called here “‘social waste related unemployment rate”.

Suggested Citation

  • Forges Davanzati, Guglielmo, 2014. "Thorstein Veblen on Consumption and Unemployment," European Journal of Economic and Social Systems, Lavoisier, vol. 26(1-2), pages 91-112.
  • Handle: RePEc:ris:ejessy:0012
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    Keywords

    Veblen; consumption; labour market;

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • B15 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Historical; Institutional; Evolutionary
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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