Veblen, Leibenstein and McCormick

Ken McCormick's note on Leibenstein's 'Veblen effect' correctly points out some of the weaknesses of Leibenstein's analysis. It is quite true that a good part of Veblen's discussion of conspicuous consumption involves the bandwagon effect, rather than the 'Veblen effect' of goods being demanded because they are expensive. On the other hand, the Veblen effect, as Leibenstein describes it can easily be found in Veblen's writings (Veblen, pp. 154-158), and it can hardly be maintained that it does not form at least a part of Veblen's argument. The point that both Leibenstein and McCormick miss is that Veblen's discussion of conspicuous consumption is a treatment of the formation and change of preferences based on the dynamic interplay of a bandwagon and a snob effect. Leibenstein's Veblen effect is one aspect of Veblen's argument concerning the operation of the snob effect in a social system in which the criterion of social worth is demonstrable pecuniary success.