Question

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What are Veblen’s main criticisms of the mainstream economic theory? Do you agree?

Answer 1

THORSTEIN VEBLEN

He was one of the chief pre hermeneutic experts of the assumptions that lay behind all idea and examination, he distinguished status imitating as a main thrust in economic undertakings, furnished the dialect with so much terms as prominent utilization, financial versus modern work, and status copying, and was a scholarly partner of the savant John Dewey. He was an author of institutional financial matters, the main non-Marxian school of economic heterodoxy in the United States.

Veblen’s critique centered on his denial of the rationality assumption.

• He argued that people were not “lightning calculators of pleasures or pains, who like a homogeneous globule of desire of happiness under the impulse of stimuli that shift about the area, but leave intact.”
• He believed that people were driven by habits and custom and by whatever constituted achievement in the currently reigning system of status emulation.
• He believed that marginal utility analysis, indeed the entire apparatus of neoclassical marginalism, was static. It therefore could not capture the important evolutionary, processual elements of the economy, including the changing institutional and power structures of society.
• Because mainstream economics was not an evolutionary science, Veblen argued in a famous essay, it had become little more than a sophisticated and subtle defense, albeit selectively, of existing institutions, the existing power structure, and the systemic and ideological status quo.
• Veblen believed that financial manipulation and decisions and plans made for purposes of pecuniary advantage along.
• Veblen also drew a distinction between technology, which he considered the driving, progressive force in human society and economy, and institutions, which he thought of as ceremonially legitimized arrangements useful at any time for perpetuating the power of the vested interests, another distinctive Veblenian term.
• It also informs us that determining “what Veblen really meant or may be understood to mean or signify” is no simple one-dimensional matter. Finally, it helps us to appreciate the roles of ideas and of the further reinterpretation of ideas in the social reconstruction of socioeconomic analyses, in part because he stressed that human institutions were artifacts (that is, social products), and not given by nature; in part because human institutions were neither teleological nor established once and for all time, but were products of processes of working things out; and in part because in those processes of working things out, ideas laden with preconceptions were very important.

• Veblen repeatedly emphasized the lack of explanatory power of taxonomic economics, a charge that Fisher attempted to rebut. Fisher’s “hedonistic taxonomy” was, in Veblen’s view, an example of cultural lag in the sense that even his new definitions and classifications lag behind changes in the economic situation and, in any case, fail to explain the circumstances that they were developed to explain. Veblen claimed that Fisher’s concept of capital and, worse yet, his concept of income, were the “perfect flower of economic taxonomy, and it shows, as no previous exposition of the kind has shown, the inherent futility of this class of work for other than purely taxonomic ends.” Despite his protestations, Fisher’s work continued to have a taxonomic stigma attached to it, at least in Veblen’s eyes.

• In The Theory of Business Enterprise, Veblen argued that interaction with the machine process fostered a matter-of-fact state of mind in the industrial worker that stripped him of respect for convention, authority, status, property rights, and perhaps religion.

• In Veblen’s analysis, however, emulation is the most powerful invaluation process and in American society has become an effective mechanism of social control. Massive systemic emulatory strain may take the form of Veblen effects, bandwagon effects, snob effects, or countersnobbery, but the result is the same; reinforcement of the existing value system and cultural mores.

By 1963, the year this study closes, the hegemony of the corporate culture was already far advanced in its development. Although Veblen explained what was occurring, all the conservatives and many of the liberals, in short, the bulk of his critics, fundamentally sanctioned the four invaluation processes that he exposed and attacked.