I'm sure many of you are familiar with the Law of Demand. You know, inverse relationship between price and quantity demanded yada yada…
Some of you might also know that there are documented exceptions to this rule. Situations where demand actually goes up with the price. One such situation was studied and codified by Norwegian American economist Thorstein Veblen.
Thorstein Veblen's thesis was written against the backdrop of the Gilded Age (1877 – 1899), a period in American history that was characterized by rapid economic growth. Sometimes referred to as the era of the Robber Barons, this period was one of the first to feature both abject poverty and ostentatious displays of wealth.
The latter led to the proliferation of high–quality, luxury items, whose market performance flew in the face of mainstream economic logic. As prices kept going up, so did demand!
Today, these goods are known as Veblen goods and are used to explain the contrarian behavior exhibited by high–quality products that thrive more on snob value and status than actual utility.
That being said, Veblen goods have come a long way since then, and there's more to this phenomenon than meets the eye.
From Luxury Goods to Luxury Beliefs
Veblen goods formed a tiny part of Thorstein Veblen’s larger treatise: a theory of the leisure class in which he postulated the downstream effects of the pursuit and possession of wealth.
One of the more prominent terms that emerged from this work is that of 'conspicuous consumption', where incredibly wealthy businesspersons (see I'm learning) no longer feel the need to engage and productive activities, and as such begin to immerse themselves in activities that contribute little to the economy.
In the years that followed the Gilded Age, much of this 'conspicuous consumption' was in the form of high–quality luxury items that only a select few people were able to afford.
But the invention of the assembly line and several innovations in quality control meant that mass–produced goods could now be had by the masses, without any compromises in the quality of these goods.
For instance, the first digital watch (developed by the Hamilton Company) sold at an eye–popping $2,100. Exactly five years later, a digital watch could be had for $10. Today, digital watches are so widespread that the most popular of them all, the Casio F–91W is a symbol of the everyman (and occasionally, the terrorist).
The point I'm trying to make here is that democratization breeds value erosion. Relentless technological progress means that that which is considered a luxury today could become the norm tomorrow.
Affluent folks understood this really well, which is why they no longer signal their status via goods. They do it with their beliefs, many of which can be quite costly to live with. Rob Henderson puts it like this:
“In the past, people displayed their membership in the upper class with their material accoutrements. But today, luxury goods are more affordable than before. And people are less likely to receive validation for the material items they display. This is a problem for the affluent, who still want to broadcast their high social position. But they have come up with a clever solution. The affluent have decoupled social status from goods and reattached it to beliefs.”
When status is recoded into beliefs, it ceases to have a physical parallel, i.e. it becomes an exclusively noetic concept that runs on our shared understanding of what it means to be a 'high-status individual'.
The problem with beliefs is that, unlike physical products, they aren't bound by the laws of physics. They spread like wildfire and can engulf entire societies in a relatively short span of time.
When beliefs become the primary means of status–seeking, the next step is the creation of symbols that propagate these beliefs. Symbols are conjured, seemingly overnight, to represent a certain ideal, that oozes status, and that brings us to our next problem: mistaking the signifier for the signified.
Map vs. Territory, Menu vs. Meals, Models vs. Data
Our never-ending quest to capture, understand and decode the material world means that we engineer representations to help sharpen our views of what exists around us. To put it simply, to navigate the territory, we need a map.
We intuitively know that the map is not the territory, but that doesn't stop cartographers (and other scientists) to inject more detail into the representation. This desire to create more accurate representations only intensified with technological progress, prompting noted scholar Alfred Korzybski to remark:
“A map is not the territory it represents, but, if correct, it has a similar structure to the territory, which accounts for its usefulness.”
This sentiment was a clarion call to academia, and society at large that we were running the real risk of confusing representations of reality with the actual underlying reality. Some 15 years after Korzybski's remark, literary superstar Jorge Luis Borges published a one-paragraph story titled On Exactitude in Science, which discussed the same thing:
“…In that Empire, the Art of Cartography attained such Perfection that the map of a single Province occupied the entirety of a City, and the map of the Empire, the entirety of a Province. In time, those Unconscionable Maps no longer satisfied, and the Cartographer's Guilds struck a Map of the Empire whose size was that of the Empire, and which coincided point for point with it. The following Generations, who were not so fond of the Study of Cartography as their Forebears had been, saw that that vast Map was Useless, and not without some Pitilessness was it, that they delivered it up to the Inclemencies of Sun and Winters. In the Deserts of the West, still today, there are Tattered Ruins of that Map, inhabited by Animals and Beggars; in all the Land there is no other Relic of the Disciplines of Geography.”
Jean Baudrillard, the noted French philosopher called this story “the finest allegory of simulation.”
The reason I'm citing all of this is that we have culturally reached a point where symbols and representations have a totalitarian hold over our mental landscape.
Think about it: why is a higher price usually seen as an indicator of higher quality?
Why are elite degrees considered to be a proxy for competence, effectiveness, and brilliance despite evidence to the contrary?
The easy way to answer this is by quipping that we are all obsessed with convenience to the point where we would outsource value identification and vetting to another entity (like we do at Stoa) and focus on the things that “matter more.”
A deeper meditation would reveal a far more insidious phenomenon that we all acknowledge but don’t quite talk about.
One that we will discuss in more detail tomorrow.