The Price of Prestige

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explaining conspicuous consumption 17


just as easily chosen a “diet” consisting of higher teachers’ wages, invest-

ment in carbon- reduction measures, and universal health care. While the

cost of these substitutes may be greater than the first set of options, they

are less conspicuous and less “luxurious,” and thus for prestige-signaling

purposes, they may be deemed less desirable despite their higher price.

The Utilities of Consumption

It is important to note that conspicuous consumption should not imply a

complete lack of instrumental value. Even luxuries deliver some “func-

tional” utility. Hence, an analysis of Veblen effects must distinguish be-

tween the primary and secondary utilities of consumption.

The primary utility is derived as “a consequence of the direct service of

the consumption to enhance life and well- being on the whole,” whereas the

secondary utility is an “evidence or social confirmation of the consumer’s

relative ability to pay” (Basman, Molina, and Slottje 1988 , 531 ). The two

utilities are in conflict with each other: one seeks to minimize cost while

the other wants to increase it; one tries to maximize instrumentality while

the other seeks to emphasize luxury and extravagance; one is inward look-

ing while the other is directed at others. Thus, prestige considerations can

overlap with considerations of security, deterrence, and welfare without

being mutually exclusive. Veblen summarizes the overlap between these

two dimensions of utility eloquently.

It is obviously not necessary that a given object or expenditure should be ex-
clusively wasteful in order to come under the category of conspicuous waste.
An article may be useful and wasteful both, and its utility to the consumer may
be made up of use and waste in the most varying proportions.... It would be
hazardous to assert that a useful purpose is ever absent from the utility of any
article or any service, however obviously its prime purpose and chief element is
conspicuous waste; and it would be only less hazardous to assert of any primar-
ily useful product that the element of waste is in no way concerned in its value,
immediately or remotely. (Veblen [ 1899 ] 1979 , 100 – 101 )

Every act of consumption is therefore driven by some combination of

primary and secondary utility. This complementarity makes the distinction

between these motivations murkier. It is hard to estimate the extent to

which a policy is motivated by primary utility or by secondary utility. It is

therefore a mistake to ask, for example, whether China’s space program is
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