But why is it called a Veblen good? I’m so glad you asked!

Veblen goods are named after Thorstein Veblen, a Norwegian-born American economist who wrote around the turn of the 20th century. Veblen was a heterodox economist who critiqued capitalism from an angle that was not Marxist, but definitely complemented Marx’s analysis.

Veblen noted the existence of Veblen goods in his broader study of what he coined “conspicuous consumption” by the “leisure class,” two terms we owe to him.

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Veblen made a lesser known but much more important contribution to our understanding of the economy. He noted that capitalist enterprise falls into two broad categories, industry and business. While we colloquially think of these two things are part of the same phenomenon, Veblen recognized that there were two separate and antagonistic processes ongoing in capitalism.

Industry is the process by which we make stuff to satisfy needs. It is a cooperative social process, the effort to satisfy needs as efficiently as possible. Its goal is collective well-being.

Business, in contrast, is about pecuniary profit for differential gain. Business is the process by which industry is mobilized to generate profits at a faster rate than other business. And, Veblen noted, this often entailed interference with industry.

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Veblen called this interference “strategic sabotage.” At the time he was writing, Veblen was thinking specifically about the way capitalists might refuse workers permission to labor, to control wages, or to deliberately under-produce, in order to keep prices high.

We can and should think about sabotage more expansively, though. When H&M burns 12 tons of unsold clothing each year, it is sabotaging industry. When De Beers buys up diamonds and then locks them up in a vault, it is sabotaging industry. When CVS pours bleach on edible but unsold food, it is sabotaging industry.

https://economicsfromthetopdown.com/2022/03/11/in-search-of-sabotage/

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Jonathan Nitzan and Shimshon Bichler, authors of “Capital as Power,” have pushed Veblen’s idea forward and view all property as sabotage—a social relationship of interference. Not necessarily in a normative sense, but in a positive one: property is the power to say no to someone else.

“Anything that can undermine the resonance of industry is a potential business asset. The private ownership of plant, equipment and knowledge (intellectual property); the ability to manipulate and leverage government policy and control the underlying population via education, propaganda and advertisement; the power to undermine autonomous thinking, restrict creative collaboration and humane planning, block the free movement of people and things, induce war and destroy the natural environment – these are all means with which business can sabotage industry. And whatever can sabotage industry can be used to extort income from it by threatening to incapacitate its activity. This sabotage, says Veblen, is the ultimate source of all business income and the basis on which pecuniary investment and the accumulation of capital rest.”

Unless something can be fenced off, it’s really hard to extract profits off it. We can put literal fences around land and post guards to deny access, but fortunately capitalists haven’t yet figured out how to sabotage and charge for access to air.

https://bnarchives.yorku.ca/750/39/20221000_bn_the_business_of_straegic_sabotage_web.htm

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You might have heard that the company that owns Instant Pot has filed for bankruptcy. The makers of Instant Pot did something horribly wrong: they made a really good product that works very well and does not need to be replaced frequently. This means that owners of Instant Pots might only need to buy one and rarely replace it, if at all.

This is a great success from the perspective of *industry,* in Veblen’s sense, but terrible for *business.* The makers of Instant Pot failed to sufficiently sabotage their product by, say, building in intentional obsolescence. Maybe they should have used cheaper parts that wear out faster, or installed software that requires regular updates, or deliberately inserted components designed to make it fail.

But they didn’t, and so sales were stagnant. The firm that owns Instant Pot borrowed lots of money in an attempt to make a new version of Instant Pot they somehow hoped to sell to consumers of Instant Pot. It was too much; the firm did not earn enough differential profits—profits at a faster rate than its competitors—and so the firm is failing, despite the success of the product.

https://thetakeout.com/instant-pot-maker-parent-brand-file-for-bankruptcy-2023-1850534708

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Business—ownership—does not contribute to production. It can *only* earn revenue through sabotage. Without the fences, the toll booths, the armed guards, the enshitification, then owners do not earn any profits. Capitalism must constantly make things *worse* than they would be if we were free to produce to meet our own and each other’s needs.

Maybe you’ve seen the news about Reddit? Reddit is restricting access to its API so it can charge more from makers of third-party apps.

Reddit’s CEO had this to say:

“Reddit represents one of the largest data sets of just human beings talking about interesting things…We are not in the business of giving that away for free."

Oh My God He Admit It dot Gif

Huffman did not create “the largest data set of human beings talking about interesting things.” Reddits users did. What Huffman owns is a *fence* around those conversations, and he only earns a profit if he can *sabotage* access.

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https://www.npr.org/2023/06/15/1182457366/reddit-ceo-steve-huffman-its-time-we-grow-up-and-behave-like-an-adult-company