24 Institutional
24.1 Veblen
Like his fellow economists, Veblen was excited by the prospect that, after Darwin, the study of human society could be placed on a scientific footing. Unlike most of his colleagues, he did not think the economic system was working. In one way or another, they maintained that an economy metes out its own rewards in proportion to the productivity of those who constitute the economy. For Veblen, it was not the fittest—that is, the most productive—who were surviving and prospering. On the contrary, the winners were a “leisure class” of unproductive parasites devoted to what he called “conspicuous consumption.” In the process, they were damaging rather than serving the interests of society as a whole. This was, to speak in rational terms, inefficient and irrational.
Capitalism = Plunder
Veblen’s early translation of the Icelandic epic [Laxdøla-saga] did foretell the visionary economics that would carry him to fame. In the introduction, added thirty-five years later, he wrote that “the Viking age was an enterprise in piracy and slave-trade” and that the Vikings thus anticipated modern “business enterprise,” which is driven “by its quest for profits” and reliant on “getting something for nothing by force and fraud.” Behind the gently waggish satire of terms like “leisure class” and “conspicuous consumption” lies a proposition that is much sterner, and more scientific. In Veblen’s view, modern capitalism, which congratulates itself on its high level of civilization, is in essence a highly organized system of barbaric plunder.
He was also lucky to take classes from a young professor named John Bates Clark (1847–1938)—“one of the most important economic theorists America has ever produced,” in Camic’s opinion. Though Clark exposed Veblen to the classical economics descended from Adam Smith and embodied by John Stuart Mill, he added his own “strong objections.” Like the so-called “historical” school of economics, which he had encountered during two years of study in Germany, Clark insisted that economic man was not a mere creature of self-interest, but rather a social being. Morality exerted an objectively measurable influence on economic life, and economics had to be cognizant of it. At that stage of his career, Clark identified as a “Christian socialist.” Veblen himself already had a reputation as an atheist.
Veblen’s doctorate in 1884, which he received after transferring to Yale, was one of the first dozen granted in philosophy at any American university. What followed, as noted above, was years of unemployment.
In all his many writings, Veblen distinguished between the industrial, which is about making useful things and providing useful services, and the pecuniary, which is about trying to get something for nothing. It is the pecuniary, he argued, that has become the dominant mode of the modern American economy and that recalls his predatory Viking ancestors.
But his scorn for pecuniary plunderers was also an inheritance. Where he grew up, the value of honest labor and the denunciation of “idleness, waste, extravagant display, and ill-gotten acquisitions” were drilled into the local children in church and in elementary school, and Camic explains why they would be. The family farm, “which both owns the means of production and provides the labor power to set them in motion,” if not exactly outside the capitalist system, was external enough to generate sharp critique of that system, especially as banks, railroads, and middlemen gradually extended their influence.