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There are no dead white economists. Apple has just proved it. Let me explain:
You will recall the 1899 publication of The Theory of the Leisure Class: An Economic Study of Institutions, in which Thorstein Veblen (left), a sort of Norwegian-American quasi-Marxist misanthrope, took upon himself to unpick the United States of America. In his socio-economic treatise, he coined the enduringly useful term conspicuous consumption. While he was mostly concerned with the stratification of society (and exploring it in an anthropological sense) he was one of the first to see the importance of technology in shaping the modern industrial society.
This approach led him to examine the varied human responses to price signals; as a result he was the first to hypothesise the positive relationship between price and demand due to what we know as “keeping up with the Joneses”. Here’s the distortion to demand, graphically:
Later economists embraced the idea, and dubbed as “Veblen Goods” products for which elevated prices attract, rather than repel customers. Exclusivity paid off for Rolls Royce, for example. Today, technologies can create cults whose members, as early adopters, gain prestige by identifying themselves as world citizens. Canny marketers then pushed the concept of “Veblen Goods” to its logical limit. If a product has such a following that customers appear insensitive to price, and therefore loyal despite competition, price and profit can be increased hand in hand.
Apple Inc. (NASDAQ code: AAPL) has just announced the biggest quarterly profit in American history – US$18 billion, largely attributable to increased sales of iPhones, much of it in China. Analysts had been ratcheting up their sales forecasts for weeks, to 69 million units, but the total of 74.5 million iPhones sold in just three months stunned everyone. Here’s the proof those profits came from the iPhone, the quintessential Veblen Good:
iPhone 5C 8GB $529
iPhone 5S 16GB $749
iPhone 6 16GB $869
iPhone 6Plus 16GB $999
iPhone 6Plus 128GB $1249
The iPhone 6 is now the most expensive phone available on the Australian market; the 6Plus model, with its 5.5” screen, is $200 dearer than Samsung’s Note3, the phone which pioneered the large screen. The term phablet is now being heard.
Clearly, there are a lot of people in the world, including Australians, willing to pay a thousand dollars and higher for mobile phones that will do little more than competitor models available at half, even one-third, the price. At that size, the 6Plus model is certainly conspicuous. Thorstein Veblen continues to make his point from the grave.
Ironically, the bigger screen sizes repudiate one of Steve Jobs’ dicta, that they were too big to hold and operate with one hand. But just as Apple has abandoned his insistence on the single-button mouse, we observe that more rational – or at least more flexible – management is now in place.
Good article Geoffrey, thank you. I would explain your article and analysis of Veblen in the following way:- [This ‘explanation’ is a modified extract from a novel I have written but am having difficulties getting published.]
Many people have an overwhelming urge, perhaps even a subconscious compulsion, to feel that they belong to something and to conform, but at the same time have conscious desires to be different and to be individualistic in order to be noticed. Some people express their ‘uniqueness’ by wearing outrageous clothing or jewellery, including body piercing.
Some emphasize that they are ‘different’ by having bizarre hair styles and colours, others by having garish distinctive tattoos on visible areas of their skin. Others demonstrate their ‘individualism’ by engaging in weird and at times even slightly antisocial or risqué activities.
The dual need for maintaining exclusivity from others whilst at the same time desiring ‘inclusivity’ for themselves seems hypocritical, but it is a universal human trait. It goes much deeper than mere tribalism and with it tribalism’s tacit implication of some sort of physical and mental security. It also even partly explains how racist and sexist attitudes and other various forms of snobbery and elitism around the world may have evolved, even if not fully justifying those sorts of behaviours.
Thank you again, Dennis
@denandsel
What’re you describing is more probably than not genetic in character. We’re hard wired to behave in these ways. In regards to individualism, yes it’s a universal human trait, i.e. it has a genetic basis. But like any trait its frequency and expression is higher in some populations than in others. This has consequences. The kind of society formed by people with a strong expression of individualism would be reasonably expected to be different to those where it’s not strongly expressed.
My point is we need to be careful about being too generic in our statements about humanity. Western societies and peoples are relatively individualistic as compared to east Asian societies (a recent study attempted to quantify this genetically — it’s still being debated, critiqued because the academy has pinned itself to the dogma of “we’re all the same/equal”). So when we make these generic hypotheses we need to be aware of our “Eurocentric” bias or the tendency to project “European” values and beliefs on to other peoples and cultures.