Thorstein Veblen

American economist

• Born: July 30, 1857
• Place of Birth: Cato Township, Manitowoc County, Wisconsin
• Died: August 3, 1929
• Place of Death: Palo Alto, California

Rejecting the classical view of economics as governed by “laws” of supply and demand, Veblen conceived a system in which production and distribution of goods would be controlled by engineers, foreshadowing a “technocracy.”

Early Life

Thorstein Veblen (THOHR-stihn VEHB-lehn) was born on an 80-acre farm in Cato Township, Wisconsin. His father, Thomas Anderson Veblen, and his mother, Kari Bunde Veblen, emigrated to the United States from Norway in 1847. The sixth of twelve children, Veblen was named for his maternal grandfather, Thorstein Bunde. Eight years later, the family moved to a 290-acre farm in Wheeling Township near Nerstrand, Wisconsin.

When Veblen was seventeen years old, his father, without consulting him, enrolled him in Carleton College in nearby Northfield. He graduated in 1880 and taught one year at the Monona Academy in Madison, 1880-1881, after which he enrolled in Johns Hopkins University in Baltimore. He failed to get the fellowship he had hoped for to enable him to pursue his studies, and he left before the term ended and enrolled at Yale to study philosophy under President Noah Porter and William Graham Sumner. He received his Ph.D. from Yale in 1884.

Veblen tried desperately to obtain a teaching appointment in the East, and finding none, he returned to Minnesota, married Ellen May Rolfe, and settled on a farm near Stacyville, Iowa. Since his degree in philosophy appeared to be unmarketable, he enrolled at Cornell in 1891 to study economics under J. Laurence Laughlin. The following year, when Laughlin was chosen to head the Economics Department at the new University of Chicago, he took Veblen along as a teaching fellow.

Veblen found advancement at Chicago to be slow and arduous. He was promoted to instructor after four years of teaching and assistant professor eight years after his first teaching assignment, in 1900. Veblen’s reputation as a teacher was in no way commensurate with his scholarship. In his lectures, he rambled and repeated himself often, and only a handful of perceptive students were willing to complete his courses.

Another problem faced Veblen, causing his dismissal from two universities and the final separation from his wife. Women seemed attracted to him and he often found himself in compromising situations. One such affair brought his dismissal from the University of Chicago in 1904. He went to Stanford University in California at the invitation of President David Starr Jordan. His wife joined him for a time, but soon Veblen became involved with another woman and his wife left him permanently. He was also dismissed from Stanford.

Veblen was unemployed for two years when Herbert J. Davenport arranged for him to come to the University of Missouri in 1911. During his seven-year stay at Missouri, Veblen became disillusioned with the whole process of higher education and left to become the managing editor of The Dial in New York. While in Missouri, he married Anne Fessenden in 1914, a divorcée with two daughters.

Life’s Work

Veblen’s ideas began to surface early in his writings and caught the attention of scholars in the schools where he received his appointments. During his brief studies at Cornell in November, 1891, he published “Some Neglected Points in the Theory of Socialism” in the Annals of the American Academy of Political and Social Science, which earned for him a four-hundred-dollar fellowship at Chicago.

Veblen was of the transplanted European stock of agrarian Midwesterners who viewed with suspicion the world of urban finances during the Populist era. He came to believe that the production of the machine age should be for the use of all and not for the profit of a few. He questioned the classical model of Adam Smith and his disciples, which left moral decisions about the distribution of wealth to the impersonal mechanisms of the free market. Veblen was particularly distressed over what he viewed as the sabotage of the production system by entrepreneurs who created artificial shortages, controlled prices, and limited new entries into business to maximize their own gains.

Veblen was not content merely to identify the problem of the capitalistic system but wished to get to its historical source. He took a multidisciplinary approach by applying the principles of psychology and anthropology to economics. He saw modern capitalism as an anthropological problem rooted in humankind’s barbaric past. Through study of archaeology and history, he developed a four-stage plan of the evolution of the human community in Western civilization: first, the peaceful savage economy of the Neolithic period; second, the predatory barbarian economy with its creation of the institutions of private property, war, masculine dominance, and the leisure class; third, the handicraft economy of the premodern period; and fourth, the machine age of potentially unlimited production.

Veblen rejected the belief that the increasing wealth and power of the wealthy and the grinding poverty of the poor were the inevitable consequences of natural laws of economics. He believed economics needed an activist psychology to supplant hedonistic humans, whom he believed acted from instincts and propensity, not from rationality.

Veblen was not a Marxist, although late in life he concluded that communism might offer a better course than unbridled capitalism. He agreed with Karl Marx that war was linked to private property. Marx looked to Georg Wilhelm Friedrich Hegel in the unfolding of history toward a predetermined goal of a class struggle and a classless society. Veblen looked to Charles Darwin and envisioned no foreordained goals but a ceaseless adaptation and continual change. Veblen did not believe the impoverishment of the industrial workers would lead to a proletarian revolution, since they do not act by a rational calculation of class interest. He believed misery brings deterioration and abjection, not rational counteraction.

The work that gave Veblen’s ideas public exposure was The Theory of the Leisure Class: An Economic Study in the Evolution of Institutions, published in 1899. His writing was not graceful, but wordy, repetitive, and argumentative. Early reviewers were infuriated over Veblen’s depiction of businesspeople as economic parasites who were dominated by a passion to amass fortunes to be spent on ostentatious living. While he placed great importance on work, he did not seem to notice that, during his time, capitalism and industrialization degraded workers. However, despite the book's flaws, the respected William Dean Howells liked it and gave it the favorable review that commended it to the world of scholars.

Veblen saw money not as a mere medium of exchange or standard of value but as an expression of power by means of its display value. With it, the captains of industry in the Gilded Age strove to outdo one another in what he called “conspicuous leisure” and “conspicuous consumption” of a pecuniary culture.

Veblen’s next major work was entitled The Theory of Business Enterprise and was published in 1904. Based on the nineteen-volume Reports of the Industrial Commission (1900-1902), he showed how the entrepreneurs had manipulated the machine process to create their power base in law and politics to protect their prowess.

In 1919, Veblen joined the faculty of the New School for Social Research in New York City. The school was begun by a number of disenchanted scholars who had left Columbia, including Charles A. Beard and James Harvey Robinson. While there, Veblen published The Engineers and the Price System (1921), in which he called for a revolution through the organization of a soviet of technicians who would control production for the benefit of all by imposing on society their own instinct for rational process. He envisioned a technocracy of highly trained engineers holding power in a new economic order that would know no national frontiers. He believed there was a cultural lag created by an unreasoning resistance to change; therefore, it was the duty of technologists and engineers to manipulate developments and create a more efficient and equitable economic order.

At the outset of World War I, Veblen published his Imperial Germany and the Industrial Revolution (1915), in which he claimed that Germany had borrowed British technology and imposed it on its feudalistic state, and out of the fusion came dynastic imperialism aimed at world conquest. George Creel saw the book’s propaganda value when the United States entered the war, although the Post Office Department labeled it subversive. The work was prophetic in that it envisioned the coming of national socialism with its racism, military caste, and expansionism. During the war, Veblen also wrote An Inquiry into the Nature of Peace and the Terms of Its Perpetuation (1917). He feared that the peacemakers would make the world safe for the vested interests and that continued national patriotism would be an obstruction to lasting peace. He accelerated his plea for peace and struggled against nativism as an editor of The Dial in New York City during the final year of the war.

In 1925, Veblen was offered the presidency of the American Economics Association, but he refused, claiming that he had not been offered the honor when he needed it most. He returned to his cabin near Palo Alto, California, where he was cared for by a stepdaughter until he died, on August 3, 1929.

Significance

Veblen was both a genius and a failure. His ideas were revolutionary and possibly found overt expression in the New Deal programs of Franklin D. Roosevelt, but he possessed no talent for their promotion or organization. He chose to remain aloof from movements during the era of the intense activism of both the Populists and the Progressives. He was a wide-ranging scholar who grappled with some aspects of human behavior to the obvious neglect of others. He seemed obsessed with leisure-class sports, dress, and objects, and yet he omitted any study of the leisure industries as economic factors in the total productive process.

Although his ideas were brilliant, his human relations were nearly disastrous. He was a clumsy speaker, an awkward writer, and a poor conversationalist. He felt more at ease in a rustic cabin, surrounded by primitive furniture he had made himself and where he kept irregular hours, than with people.

His assault on the free market theories of the classical economics of Adam Smith and his disciples were telling; he created an awareness that there are no immutable laws that govern economics, and that people acting out of primitive, acquisitive instincts have clothed themselves with the respectable mysticism of conspicuous consumption and leisure. Science and technology have unveiled this mysticism and made possible the evolution of a new era, wherein the production capacities of technology are not manipulated for the extravagance of the rich but for the benefit of all humankind.

Bibliography

Adil, Mouhammed H. An Introduction to Thorstein Veblen’s Economic Theory. Lewiston, N.Y.: Edwin Mellen Press, 2003.

Diggins, John P. The Bard of Savagery: Thorstein Veblen and Modern Social Theory. New York: Seabury Press, 1978.

Dorfman, Joseph. Thorstein Veblen and His America. New York: Viking Press, 1934.

Duffus, Robert L. The Innocents at Cedro: A Memoir of Thorstein Veblen and Some Others. New York: Macmillan, 1944.

Edgell, Stephen. Veblen In Perspective: His Life and Thought. Armonk, N.Y.: M. E. Sharpe, 2001.

Hodgson, Geoffrey, N. "Thorstein Veblen and Socialism." Journal of Economic Issues, vol. 57, no. 4, 14 Dec. 2023, doi.org/10.1080/00213624.2023.2273138. Accessed 20 Aug. 2024.

Lerner, Max, ed. The Portable Veblen. New York: Viking Press, 1950.

Mitchell, Wesley C., ed. What Veblen Taught. New York: Viking Press, 1936.

Riesman, David. Thorstein Veblen: A Critical Interpretation. New York: Charles Scribner’s Sons, 1953.

Rosenberg, Bernard. The Values of Veblen: A Critical Appraisal. Washington, D.C.: Public Affairs Press, 1956.

Spindler, Michael. Veblen and Modern America: Revolutionary Iconoclast. Sterling, Va.: Pluto Press, 2002.

Wisman, Jon D. "The Industrial Degradation of the Workplace That Thorstein Veblen Overlooked." Cambridge Journal of Economics, vol. 48, no. 4. July 2024, pp. 567-588, doi.org/10.1093/cje/beae017. Accessed 20 Aug. 2024.