In economics we learn that as prices rise, demand falls. This happens because we assume that rational customers are looking to buy things that provide the most value for the least expense. But there’s a class of goods that don’t behave this way: Velben goods.
Veblen goods defy classical economics. Named after Thorstein Veblen, an American economist, these products become more desirable as they become more expensive. These goods are more desired not from the needs they fulfill but from their ability to signal status, exclusivity, and wealth.
What Are Veblen Goods?
Veblen goods are products where price is the feature, not the bug. The more expensive the item, the more attractive it becomes. Veblen argued that people buy these goods not because they are inherently better, but because the higher price signals exclusivity.
Examples of Veblen goods include:
- Luxury cars like Ferraris or Lamborghinis, which are not just about driving.
- Designer handbags from Louis Vuitton or Hermès, which say more about the owner than the quality of the leather.
- Exclusive watches such as Rolex or Patek Philippe, which are about more than telling time.
- High-end fashion, where clothes from brands like Chanel or Gucci are about more than keeping warm.
Lowering the price of a Veblen good reduces their appeal because they become less valuable as a marker of wealth and success. That’s why products from premium companies like Apple or Estee Lauder are rarely discounted. Instead, to drive volume, these products are bundled with other incentive products so customers get more value at the same price.
From the Elite to the Everyday
While Velben good is a bit of an obscure term, another term created by Velben is more familiar: conspicuous consumption. Originally, conspicuous consumption—the tendency to buy expensive goods to showcase wealth—was limited to the leisure class. Veblen described this leisure class as those people that were so wealthy that they had free time, which signaled their superiority over the working class. But in today’s consumer-driven society, conspicuous consumption is widespread, affecting not just the wealthy elite but also the middle class and even those below.
The availability of credit and the rise of affordable luxury brands has democratized Veblen goods. It’s no longer just the ultra-wealthy who can buy expensive items to signal their status. Middle-class consumers, driven by the same instinct to signal wealth and exclusivity, now engage in status-driven spending, often going into debt to do so.
Today’s market is filled with “affordable luxury” brands—Michael Kors, Coach, and others—that offer the allure of luxury without the unattainable price tag. While these items aren’t as expensive as a Hermès bag, they still allow consumers to participate in status signaling on a smaller scale, especially on social media.
From Conspicuous Consumption to Conspicuous Sharing
This is similar to the way that Ze Frank thinks about sharing on social media. On social media, sharing a piece of content is not just about the content itself—it’s about what that content says about the person sharing it. Ze notes that much of social media sharing is driven by identity, where users post videos, memes, or articles that reflect their worldview, sense of humor, or social affiliations.
This explains why people don’t always share the media they actually like the most. For instance, someone might genuinely love a romantic comedy or a Jackass video, but they won’t share or like it online if it doesn’t align with the image they want to project. Instead, they might choose to share content that shows the image if they want to project, even if they personally find it less enjoyable.
Summing Up
To wrap up, Veblen goods flip the script on economics. In standard economics, the higher the price, the less we should want something. But Veblen goods laugh at that logic. These products get more desirable the pricier they become because they aren’t about what they do—they’re about what they mean. Luxury cars, designer bags, and high-end fashion aren’t just items; they’re signals, letting the world know you’ve “made it.”
What’s fascinating is how this once elite phenomenon has trickled down to the rest of us. Thanks to credit cards and “affordable luxury” brands, it’s no longer just the ultra-wealthy flashing status symbols. Today, almost anyone can get in on the act, picking up a Michael Kors bag or a flashy watch to show they’ve got a foot in the luxury world, even if it means stretching the budget.
At the end of the day, Veblen’s ideas on conspicuous consumption feel more relevant than ever, particularly in the age of social media. Social media sharing is about projecting a carefully curated identity. Social sharing is not about what people like the most, but because it helps them express how they want to be seen by others. Whether it’s buying a luxury product or sharing a viral video, the driving force is the same: curating the way that they are seen at the expense of other things.
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