In an old movie, to show how rich he is, a character lights a cigar with a burning hundred-dollar bill. That’s an excellent example of the concept of “conspicuous consumption.”
The key is that it is conspicuous, in public where people will see. It’s essentially flaunting of wealth, of ‘I’ve got it and you don’t.’ It’s the motivation for some wealthy people to buy million-dollar sports cars, to wear expensive gowns, to have 100-foot yachts, to wear diamond bracelets and necklaces, wear fifty thousand-dollar watches, and buy mansions.
Things that people use to conspicuously display their wealth include cars, jewelry, clothing, watches, designer anything, fine wines, attendance at exclusive events, expensive homes, purchasing art, hosting lavish social events and more.
The phenomenon has been around far longer than the economic concept. Romans flaunted silks and gems, and Marie Antionette’s Paris ate cakes that cost the equivalent of a peasant’s yearly income. In the contemporary U.S., rap artists are wrapped in bling and billionaires put their name on skyscrapers.
This kind of behavior was analyzed by the American economist Thorstein Veblen (1857-1929). In his 1889 book Theory of the Leisure Class, Veblen named it “Conspicuous Consumption.” He was not complimentary with the concept. His book was published in the Gilded Age when conspicuous consumption in the form of flaunting wealth was characteristic of the age.
Economists still debate the importance of conspicuous consumption. Do luxuries have any economic benefit beyond gratification? Some economists say that it creates jobs and supports people who create and sell luxuries.
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