The Metaphysics of Business: Thorstein Veblen

International Journal of Politics, Culture and Society, Vol. 11, No. 4, 1998

I. Thorstein Veblen and Max Weber: Two Studies

The Metaphysics of Business: Thorstein Veblen

John Wenzler

Business enterprise, it is true, proceeds on metaphysical grounds and is swayed by con-siderations of nominal wealth rather than material serviceability; but, none the lessbusiness enterprise and business metaphysics control the course of industry.

The Theory of Business Enterprise

Modern economic theorists, who generally consider themselves value-free social scientists, often have been puzzled by the work of ThorsteinVeblen. Although Veblen insisted that he too was an objective social sci-entist, most of Veblen’s readers have sensed that his theory expressed apowerful moral critique of American culture. For example, Veblen’s famousconcept of "conspicuous waste," which he defined as expenditure that "doesnot serve human life or human well being on the whole" seems to implya prior moral judgement. One cannot decide what serves human well beingwithout determining what humans ought to be. Yet, Veblen insisted that heemployed his concept in a purely technical sense that implied "no depre-cation of the motives or of the ends sought by the consumer under thiscanon of conspicuous waste.”1 Although many of Veblen’s readers have dis-missed such assertions of objectivity as a humorous disguise that veiled Ve-blen's moral purpose, Veblen’s commitment to science seemed to be muchmore than an elaborate joke.2 Throughout his career, Veblen consistentlyclaimed that he was a scientist rather than a moralist. In nearly all of hiswritings, Veblen championed the scientific point of view and repeatedly toldhis students that "we are interested in what is, not what ought to be.”3

The only time that Veblen chose to respond publicly to criticism of hiswork, he did so in order to defend his objectivity against a critic who hadargued that The Theory of the Leisure Class was moral philosophy disguisedas social science.4 Veblen’s insistence on his absolute scientific neutralityeven as he employed loaded terms and definitions has prevented his inter-preters from agreeing about his moral stance and thus about the broadersignificance of his work.5

In order to develop a more coherent account of Veblen’s theoreticalapproach, I believe that we need better to understand the ambiguous in-

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© 1998 Human Sciences Press, Inc.

tellectual tradition that he confronted. Veblen insisted on separating sci-entific facts from moral values throughout his career because he believedthat the most insidious flaw of American capitalism was its tendency totransform values into facts. Veblen perceived this flaw in business enterprisebecause he was responding to a powerful tradition of American economictheory that had predicted that capitalism would unite scientific and morallaw. Throughout the nineteenth century, popular American economistssuch as Henry C. Carey and Henry George had argued that the market-place would produce and distribute moral virtue and spiritual freedom asefficiently as it would produce and distribute industrial resources. JohnBates Clark, Veblen’s teacher and the most influential American economistduring Veblen’s career, inherited this tradition and epitomized its faith inthe harmony between science and morality. In his Distribution of Wealth,Clark argued that “the income of society is controlled by a natural law . . . .This law, if it worked without friction, would give to each agent of pro-duction the amount of wealth which that agent creates.”6 Through thisnatural/moral law, Clark believed that the system of private property wouldmoralize the economic landscape of America so that one would be able tomeasure a man’s virtue by means of his possessions. Even the critics of theAmerican economy in Veblen’s era often accepted this goal of uniting moraland natural law as the legitimate purpose of economic progress. Theymerely argued that American society had not yet realized the promises ofthe American dream because it had not yet distributed the commoditiesthat symbolized moral virtue to those who had truly earned them.7

Veblen rejected these “metaphysical grounds” of American businessenterprise, not only because he considered them false, but also because heconsidered them the chief source of dissension and despair in modern so-ciety. Instead of believing that the effort to unify moral values with materialfacts justified capitalism, Veblen argued that it led men into a deadly worldof illusion and violence. According to Veblen, it was the capitalist’s meta-physical desire for moral honor rather than his vulgar bodily needs thatled to the social conflict and irrational waste of resources characteristic ofcapitalism. The businessman’s effort to demonstrate his moral worththrough the accumulation of physical wealth justified the military adven-tures of imperialist politicians and undermined social solidarity. It led toa war of all against all in which men fought with each other for control ofthe commodities that would symbolize their virtue. For Veblen, therefore,the spiritual goals of American capitalism corrupted the flesh of industrialprogress, and the moral promises of private property undermined the re-ality of America’s material abundance.

In order to escape from the illusions of business metaphysics, Veblenattacked Clark’s desire to harmonize moral truth with scientific law at its

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philosophical roots. He did so by sharply distinguishing between "two di-vergent methods of apprehending and systemizing the facts of experience"throughout his career. Veblen repeatedly contrasted the "spiritual," "per-sonal,” “teleological,” or “animistic,” method of interpreting experiencewith the "materialistic,” “impersonal,” “non-teleological,” and "matter-of-fact" method. All of these distinctions focused on the difference betweenthe way that we explain the behavior of conscious, teleological, humanagents and the way that we explain the motions of inanimate, nonteleologi-cal, physical objects. Thus, the fundamental epistemological idea at theheart of Veblen’s thought was a categorical distinction between people andthings or between mind and matter. This basic distinction led to Veblen’seffort to segregate facts from values because Veblen assumed that only hu-man minds—and not the phenomena of nature—were capable of formu-lating and acting upon moral beliefs.8 Although this idea seems obviouswhen stated so baldly, it became central to Veblen’s criticism of businessenterprise because he believed that business metaphysics turned this obvi-ous relationship between agents and objects up side down. According toVeblen, businessmen and political economists constantly tended to imputemoral agency to natural phenomena at the same time they ignored themoral agency of human beings.

By focusing on Veblen’s effort to maintain this categorical distinctionbetween people and things, we can begin to understand Veblen’s theory asa more coherent whole. The dichotomy between agents and objects led tothe other important dichotomies of Veblen’s theory such as his distinctionsbetween modern science and political economy, between the laboring classand the business class, and between industrial and pecuniary employments.According to Veblen, modern scientists, industrial workers, and engineersall focused on controlling and manipulating the inanimate processes of na-ture. Their philosophical point of view was governed by their emphasis onthe relationship between people and things. Political economists, the leisureclasses, and businessmen, in contrast, focused on controlling and exploitingother spiritual agents. Their philosophical point of view was governed bytheir emphasis on coercive and competitive relationships between people.The distinction between agents and objects also led to Veblen’s explanationof private property as a leisure class institution that undermined the dif-ference between people and things. In addition, it was central to Veblen’sanalysis of the business cycle, which was caused by conflict between theindustrial worker's effort to increase man's power over inanimate natureand the businessman's effort to dominate other people.

Once we understand the central importance of this distinction betweenpeople and things to Veblen’s analysis of modern society, we will also bebetter able to understand his moral ambiguities. Veblen found it difficult

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to articulate a consistent moral relationship between the social scientist andsociety because society is neither a person nor a thing. Unlike individualhuman beings, society is not a conscious teleological agent, but unlike bio-logical evolution, society is not a completely mechanical and amoral processeither. As such, society did not fit neatly into Veblen’s epistemological cate-gories. In order to avoid the error of economists like Clark, who thoughtof the economy as a quasi-person that shared his own moral values, Veblenassumed that the moral beliefs of the social scientist were irrelevant to hisanalysis. Yet, Veblen could not avoid making implicit judgments about theends that social life ought to achieve in his effort to explain the “waste”caused by capitalism. In addition, Veblen’s assumption that society was athing led him to underestimate the extent to which human values couldshape society. He generally saw moral beliefs as “cultural lag” or as a de-layed mental response to social development, rather than as an active causeof social change. This prevented him from fully articulating alternative val-ues that could challenge the perverse values of the businessmen that hecriticized. But this is getting ahead of the argument. Before we can lookat Veblen’s alternatives to business enterprise, we have to understand whyVeblen considered business values perverse.

DARWINIAN SCIENCE VERSUS POLITICAL ECONOMY

Veblen’s famous claim that economics was “not an evolutionary sci-ence” was not simply a complaint about the static mathematical formulasof classical economics, which were incapable of explaining the dynamicprocess of social change. Veblen acknowledged that “efforts to formulateand explain schemes of process, sequence, growth, and development”abounded in “pre-evolutionary” science. The essential difference betweenDarwinian science and political economy went much deeper than this. Itwas “a difference of spiritual attitude or point of view ... a difference inthe basis of valuation of the facts for the scientific purpose.”9 Economicshad failed to become a Darwinian science because its fundamental philo-sophical preconceptions differed from those of modern scientists. The“spiritual attitude” of modern science, according to Veblen, consisted oftwo epistemological assumptions. First, modern scientists assumed thatnon-human events or processes never could be explained by attributing tele-ological purpose or meaning to them. Second, modern scientists assumedindividual human behavior only could be explained by attributing teleologi-cal goals to the human mind. The pre-Darwinian “spiritual attitude” ofpolitical economy, in contrast, imputed spiritual agency to the economicprocess as a whole while it denied the agency of individual human actors.

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Veblen’s historical account of the modern scientific point of view fo-cused on humanity's increasing tendency to separate the mind from theimpersonal phenomena of nature. Primitive cultures, according to Veblen,made no sharp distinction between actions of human beings and the eventsof the natural universe. Because they assumed that animals, trees, and riv-ers had intellectual motives much like their own, they populated the uni-verse with a multitude of non-human spiritual agents. “Primitive people[were] guided by animistic norms. They [made] up their cosmologicalschemes and the like, in terms of personal or quasi-personal activity, andthe whole [was] thrown into something of a dramatic form.”10 Becauseprimitive mythology explained the patterns of nature by imputing humanpurposes to natural events, the primitive universe became a vast play inwhich the aims, emotions, and ideals characteristic of human agents withinsociety expressed themselves on a cosmic scale. Primitive cultures alsosought to alter the natural environment in the same way that they soughtto influence other human beings. Magic rituals and religious ceremonieswere attempts to persuade the spiritual agents of nature to pursue endsthat corresponded to the ends of particular groups of people.

Along with this mythology of nature, however, Veblen argued thatprimitive societies necessarily had developed a body of matter-of-factknowledge similar to the knowledge sought by modern scientists. In addi-tion to knowing about the personalities who governed the universe, “they[knew] equally well the matter of fact that water runs down hill, that twostones are heavier than one of them, that a pointed stick may be stuck inthe ground, and the like.”11 Veblen called these “generalizations from ex-perience” industrial or lower knowledge, as opposed to the higher knowl-edge of myth and theology. Although most people throughout humanhistory had had a livelier interest in higher knowledge because it gave morefreedom to human creativity, Veblen argued that the survival of a societydepended on its stock of industrial knowledge. Religious attempts to modifynature by appealing to the spiritual forces that governed it failed to providefood, shelter, and clothing as effectively as mechanical attempts to manipu-late nature conceived of as an impersonal sequence of facts.

Modern science developed, according to Veblen, as industrial knowl-edge of impersonal sequences increasingly encroached upon the higherrealm of myth and theology. He argued that “the guiding hand of a spiritualagency or a propensity in events becomes less readily traceable as men'sknowledge of things grows ampler and more searching.”12 As a societygained more knowledge, it became harder to impute spiritual consistencyto nature without contradicting known sequences of facts. Consequently,mythologists were forced to populate the universe with fewer spiritualagents, and those spirits that continued to exist receded into the back-


ground where they seldom interfered with daily life. Darwin's Origins ofSpecies represented the culmination of this process of dehumanizing naturebecause Darwin had explained the evolution of the entire biological uni-verse without referring to any prime mover outside of the facts themselves.By demonstrating that the “colorless impersonal sequence of cause and ef-fect can be made use of for theory proper, by virtue of its cumulative char-acter,” Darwin had banished all teleological agents from his account of theuniverse.13 In the late nineteenth century, natural scientists in all fields ofresearch increasingly had adopted the same approach. For these modernscientists, “esoteric knowledge of matter-of-fact” had replaced “the moreemotional and spiritual virtues that once held the first place” as the centralgoal of man’s idle curiosity.14

Not all modern thinkers were willing to accept the mechanistic con-sequences of Darwinian science, however. Romantic philosophers, accord-ing to Veblen, resisted the point of view of modern science by continuingto look for some sort of quasi-spiritual force behind the facts of naturethat would direct them toward the accomplishment of humanly meaningfulends. Although they no longer were able to believe in the multitude ofspiritual agents that had populated primitive mythologies, Romantics stilllooked for some sort of dramatic consistency in the processes of nature asa whole. Hegel's teleological philosophy, which argued that the emancipa-tion of the human spirit was the “end” of human history, was a perfectexample of Romanticism according to Veblen. Hegel was not content todescribe the facts of history and to explain their efficient causes but hadto find the ultimate meaning of these facts. For Veblen, this desire to infusescientific facts with meaning or value always distorted the post-Darwinianscientists' effort to discover impersonal, cause and effect, sequences. UnlikeHegelian philosophy, Darwinian natural science was a “scheme of blindlycumulative causation, in which there is no trend, no final term, no con-summation. The sequence is controlled by nothing but the vis a tergo ofbrute causation, and is essentially mechanical.”15 Facts were “opaque” tothe modern scientist because they were the beginning and the end of hisresearch, and he did not try to look beyond them to discover their signifi-cance.

Conventional economic theory, according to Veblen, shared the Ro-mantic preconceptions of Hegelian history. Like Hegel, but unlike modernscientists, political economists perceived a “meliorative trend” within thecourse of events. Economic theory imputed “to things a tendency to workout what the instructed common sense of the time accepts as the adequateor worthy end of human effort. It is a projection of the accepted ideal ofconduct.”16 Much like primitive mythologists, economists assumed that theeconomic system as a whole was a spiritual agent that sought to achieve

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goals similar to the goals of the human agents within their society. AdamSmith’s metaphor of the “unseen hand,” which suggested that an invisibleanimistic agent guided the economic process toward the ends desired bySmith better than individual human beings, perfectly expressed these tele-ological preconceptions of political economy. More recent economists, al-though they might have rejected Smith’s metaphor, continued to analyzethe economy as if it the marketplace was governed by a conscious tele-ological purpose. They believed that they had theoretically explained aneconomic phenomenon, such as money or credit, when they had demon-strated “the end which, ‘in the normal case,’ it should work out accordingto the given writer’s ideal of economic life, rather than in terms of causalrelation.”17 To explain a phenomenon, for a political economist, was to de-scribe the moral values that the phenomenon ought to achieve. Becausemodem economists continued to explain economic processes by looking forthe spiritual or human motives that governed them, Veblen believed thatthey were incapable of discovering impersonal and mechanical relationshipsbetween economic facts.18

The economist's Romantic desire to impute teleological agency to thenonhuman processes was not the only philosophical difference betweenmodern science and political economy, however. Political economy also dif-fered from modern science because it tended to deny spiritual agency tothe human mind. At the same time that Darwinian science was eliminatingagency from the natural universe, according to Veblen, modern psychologyand anthropology were emphasizing that individual human behavior hadto be the result of conscious purposeful action. Veblen argued that the“later psychology, and the sciences which build on this later psychology,insist upon and find ... a teleological trend” in “individual conduct.”19

Veblen’s “instinct of workmanship” emphasized this assumption of tele-ological purpose within individual behavior. According to Veblen, work-manship had to be an instinct because “as a matter of selective necessity,man is an agent. . . seeking in every act the accomplishment of some con-crete, objective, impersonal end. By force of his being such an agent he ispossessed of a taste for effective work, and a distaste for futile effort.”20

Because the process of evolution had provided human beings with the fore-sight that enabled them to anticipate the consequences of their actions,people were spiritual agents. This meant that it was not possible to explainhuman action without understanding the teleological purposes of the hu-man agent as well as the environment in which he found himself. As naturalscientists increasingly banished all other agents from the universe, there-fore, scholars were beginning to recognize that the meaning and purposethat continued to exist in their experience had emanated from the humanmind.


Political economy had failed to this achieve this recognition, however,because it had adopted “as a matter of course or of common notoriety”the hedonist psychology developed by early nineteenth-century Utilitarianphilosophers.21 Hedonism, according to Veblen, eliminated the human mindas an active agent by reducing all human motives to the physiological desireto achieve pleasure and avoid pain. Veblen expressed this idea forcefullyin a famous passage of “Why is Economics Not an Evolutionary Science.”Here, he claimed that the hedonistic man was:

an isolated, definitive human datum, in stable equilibrium except for the buffets ofthe impinging forces that displace him in one direction or another. Self-imposedin elemental space, he spins symmetrically about his own spiritual axis until theparallelogram of forces bears down upon him, whereupon he follows the line ofthe resultant. When the force of the impact is spent, he comes to rest, a self-con-tained globule of desire as before. Spiritually the hedonistic man is not a primemover.”22 (My emphasis)

By trying to study human behavior in the same way that Darwinian scien-tists studied natural phenomena, hedonists suggested that teleological pur-pose was as irrelevant to human action as it was to the motion of a cannonball. They were thus moving in the exactly opposite direction of modernpsychologists.

Veblen employed the instinct of workmanship to argue that these he-donistic assumptions made political economy irrelevant from the perspec-tive of a modern science of human behavior. If man was an agent“possessed by a taste for effective work,” according to Veblen, then “pleas-ure . . . [resulted] from the attainment of some already existing end of ac-tion; it [was] not itself an end.”23 Human activity was

not something incidental to the process of saturating given desires. The activity isitself the substantial part of the process, and the desires under whose guidance theaction takes place are circumstances of temperament which determine the specificdirection in which the activity will unfold itself in the given case.24

In other words, Veblen believed that pleasure could not be the final goalof human action because a person’s chief source of pleasure in life wasthe successful accomplishment of whatever goal he already wanted toachieve. Whereas the hedonists had assumed that man’s universal desirefor sensual pleasure determined his mental ends, therefore, Veblen arguedthat a man’s “already existing” spiritual ends determined what would pleasehim.

The significance of this distinction is evident in difference between thehedonist’s analysis of the motives of business enterprise and Veblen’s analy-sis. According to the hedonists, a businessman tried to make as muchmoney as possible for the same reason that any human being did any-thing—so that he could maximize his desire “to procure the pleasurable

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sensations of consumption.” According to Veblen, in contrast, “businessmen habitually aspire to accumulate wealth in excess of the limits of prac-ticable consumption, and the wealth so accumulated is not intended to beconverted by a final transaction of purchase into consumable goods or sen-sations of consumption.”25 This meant that making money was an “alreadyexisting” ideological end in itself for the capitalist, which gave him spiritualsatisfaction regardless of the sensual pleasures that money could buy. Thus,Veblen believed that the important questions about business enterprise,from the perspective of modern science, focused on the origins and con-sequences of this spiritual imperative to make as much money as possible.Where and when did it arise? What were its consequences for the socialand economic life of the community? How did the businessman’s spiritualgoal of accumulation differ from the spiritual goals pursued by other humanagents within the businessman’s community or by other human agents inother communities? Conventional economists, because their preconceptionsreduced all human motives to the universal desire to achieve pleasure andavoid pain, could not even ask these questions about the teleological pur-poses of business enterprise or of any other human endeavor.

Although, at first glance, the hedonistic attempt to deny teleologicalagency to people seems to contradict the Romantic attempt to imputeagency to things, Veblen argued that these two preconceptions reinforcedeach other within conventional economic theory. In order to believe thatthe “meliorative trend” that they had imputed to the economic processgoverned the economy as a whole, economists had to assume that

no discretion resides in the intermediate terms through which the end is workedout. Therefore man being such an intermediate term, discretion cannot be imputedto him without violating the supposition. Therefore, given an indefeasible meliora-tive trend in events, man is but a mechanical intermediary in the sequence. It isas such a mechanical intermediate term that the stricter hedonism construes humannature.26

In order for the economic system to have its own end, human beings hadto become mere means, mechanical tools employed by the invisible handin its effort to allocate human resources beneficently. By looking for tele-ology in all the wrong places, therefore, economists had allowed the spiri-tual purpose that they had imputed to nonhuman economic processes tousurp the purposes of individual human beings.

Economists were not, however, the only people in modern society tosee human beings as means rather than ends. For Veblen, the contrast be-tween modern science and political economy not only demonstrated thedifference between the spiritual attitudes of two groups of intellectuals butalso the difference between the points of view of the two major classes inmodern society. The industrial or working class, according to Veblen, was


most likely to adopt the point of view of modern science. Because workersearned their livelihood by altering the inanimate environment of nature,the matter-of-fact preconceptions of Darwinian science were necessary tothem in their daily activities. The business class, in contrast, was much morelikely to adopt the point of view of political economy. Because they earnedtheir livelihood by manipulating the spiritual environment of other people,the materialistic conclusions of Darwinian science were irrelevant in thedaily activity of a businessman. Furthermore, the pecuniary occupations ofbusinessmen, unlike the industrial occupations of laborers, made themmore likely to adopt the hedonistic idea that people were mere meansrather than independent spiritual agents. To understand this argument,however, we need to see how Veblen’s distinction between manipulatingpeople and manipulating things shaped his theory of the social classes.

LEISURE, LABOR, AND BUSINESS

Veblen’s leisure class was not a group of people who did nothing oreven a group of people who did things that we would normally think ofas leisurely activities. Of the four occupations that Veblen specifically at-tributed to the leisure class, “government, warfare, religious observances,and sports,” only sports would immediately strike the modern Americanas a form of leisure. Warfare, religion, and even government seem to bethe opposite of leisure because they are serious endeavors that one wouldnot pursue merely for the sake of relaxation or recreation. But relaxationand recreation were not the fundamental spiritual goals of Veblen’s leisureclass. The feature that united all of the leisure-class occupations into asingle category, for Veblen, was that they were all endeavors in which mensought to conquer other spiritual agents, either human or divine. Veblen’sleisure class was the class that acquired its economic goods and achievedits social standing by dominating other agents. The industrial class, in con-trast, was the class that acquired its economic goods by altering the inani-mate environment to make it more suitable for human existence. Theleisure class manipulated people; the industrial class manipulated things.

The business class, according to Veblen, was essentially a modem mani-festation of the leisure class that employed the leisure class institution ofprivate property to conquer and control other human agents. The modembusinessman’s quest to accumulate capital like the medieval aristocrat’squest for military glory was a spiritual attempt to dominate other agentsthrough metaphysical signs and symbols. There was, however, an importantdifference between the modern businessman and the old-fashioned aristo-crat. Whereas the traditional aristocrat openly expressed his disdain for the

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vulgar occupations of the laboring class, the modern businessman was con-vinced that his metaphysical endeavors somehow improved the materialwell-being of society as a whole. Although, in reality, the businessman spenthis days exploiting other people like the medieval lord, he believed that hewas altering the inanimate environment like the industrial worker. This am-biguity in the social role of the businessman led to the ambiguous precon-ceptions of political economy, which thoroughly conflated the differencebetween exploiting people and manipulating things.

Veblen’s counterintuitive description of business enterprise as form ofleisure arose out of his genetic analysis of modern society, which dividedsocial history into four basic stages: the era of savagery, the barbarian era,the era of handicraft industry, and the era of machine production. Accord-ing to Veblen, the industrial class arose in the era of savagery and remainedconsistent throughout history, although it lost most of its cultural prestigein later eras. The leisure class arose in the barbarian era and graduallyevolved into the business class through the eras of handicraft industry andmachine production. By looking at these origins of business enterprise, wecan better understand why Veblen thought of leisure as the spiritual domi-nation of other people and how business enterprise became an unacknow-ledged form of leisure.

The era of savagery was the first and longest period of human history,according to Veblen. In this stage of civilization, every individual in a com-munity had to engage in productive labor because the primitive state ofindustrial knowledge prevented the society from producing an economicsurplus that could feed non-producers. Individuals within the savage societyalso had to cooperate with each other in the distribution of economic sup-plies so that everyone would get enough resources to maintain his or hercapacity for work. The cooperation thus imposed on the savages by theniggardliness of nature meant that

the dominant spiritual feature of this presumptive initial phase of culture seems tohave been an unreflecting solidarity largely expressing itself in a complacent, butby no means strenuous, sympathy with all facility of human life, and an uneasyrevulsion against apprehended inhibition or futility of life.27

There were no class distinctions in this savage society and industry was“organized on the ground of workmanship alone.” Although the savagesdid engage in mythological speculations about the spiritual agents who con-trolled their natural environment, their mythologies were simply an attemptto satisfy their idle curiosity and had little economic significance. Becausethe key to the material well being of both the individual and of the com-munity as a whole was the community’s joint ability to manipulate the im-personal sequences of nature, interpersonal conflict had few economicconsequences for the savage.


The transition from this classless state of society to the barbarian stageof culture, in which the leisure class arose—“the most universal and mostradical mutation which human culture has undergone in its advance fromsavagery to civilization”—was marked by the increasing economic signifi-cance of interpersonal conflict. As the barbarian's predatory cultureemerged,

the character of the struggle for existence changed in some degree from a struggleof the group against a non-human environment to a struggle against a human en-vironment. This change was accompanied by an increasing antagonism and a con-sciousness of antagonism between individual members of the group.28

Although Veblen could never fully explain how and why a formerly peace-able and cooperative society would become predatory and competitive, hedid argue that this change would have been impossible before it becameproductive enough to produce a surplus. In contrast to most nineteenth-century economists, who had assumed that scarcity provoked social conflictand that abundance would lead to social harmony, Veblen believed thateconomic scarcity forced men to cooperate but that abundance gave themthe freedom to engage in the interpersonal battles that characterized highculture.

“Force and fraud” were the chief means by which the emerging leisureclass of a barbarian society harvested the economic surplus produced byits human environment. Warrior classes liberated themselves from the vul-gar requirements of industrial labor by appropriating the excess productionof others through force. Priestly classes elevated themselves above the com-mon herd by the more subtle means of fraud. They transformed primitivemythologies into economic assets by trading the intangible threats andpromises of nonhuman spiritual agents for tangible economic goods. Be-cause the demands of the spiritual agents imputed to nature were immeas-urable and indefinitely extensible, there was “no limit to the value of suchministrations except the limit of tolerance, ‘what the traffic will bear.’”29

This meant that priestly fraud could usually appropriate the entire surplusthat the warriors did not acquire through force. As warriors and priestsbegan to dominate the human environment, the barbarian society was di-vided into two classes. The industrial class continued to obtain its subsis-tence by manipulating the impersonal environment as the savages haddone, but the leisure class now focused on spiritual conquest and no longerhad direct contact with the matter-of-fact natural environment in its eco-nomic activities.

At the same time that the leisure class freed itself from industrial la-bor, it also developed a code of cultural values that stressed the moralsuperiority of leisure-class occupations. The fundamental idea at the heartof barbarian culture, according to Veblen, was the invidious distinction be-

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tween “exploit” and “drudgery.” Exploit implied the power to transformother teleological agents into means rather than ends. “In so far as it resultsin an outcome useful to the agent” exploit involved “the conversion to hisown ends of energies previously directed to some other end by anotheragent.”30 In the mind of the barbarian, a successful act of exploit signifiedthe spiritual superiority of the exploiter because he had succeeded in im-posing his will on another agent. The quest for honor, dignity, and nobilitythat motivated aristocrats in a barbarian culture was thus a quest to domi-nate others. “With the primitive barbarian . . . ‘honorable’ seems to con-note nothing else than the assertion of superior force. ‘Honorable’ is‘formidable,’ ‘worthy’ is ‘proponent.’ An honorific act is in the last analysislittle if anything else than a recognized successful act of aggression.”31 Al-though the aristocratic concept of honor did acquire additional connota-tions through time, it never lost its original meaning, and Veblen consideredthe idea of a nonexploiting nobility to be a contradiction in terms.

In contrast to the spiritual conquests implied by exploit, drudgery wasthe industrial act of making “new things” out of “inert” material. Becausethe working drudge merely confronted an impersonal world that could notbe exploited (because it had no ends of its own), drudgery could neverconfer prestige on the drudge no matter how efficient he became in hiswork. Not only did drudgery lack honor in and of itself, but the leisureclass also exploited those who engaged in drudgery. In the barbarian mind,therefore, the men and women who worked for a living were doubly de-graded because they lacked the spiritual power to resist domination byother agents. Eventually, industrial labor, which had been satisfying to thesavage because he possessed a native instinct for workmanship, became“irksome” to the barbarian. Labor became vulgar, ignoble, and base andit remained so as modern civilization developed. “The nobility of labor,”Veblen observed, “is a disingenuous figure of speech” because the entireconcept of nobility had been built on the exploitation of labor and theinvidious denigration of industry.

Perhaps the most paradoxical manifestation of the leisure class’s cele-bration of exploit and disdain for labor was conspicuous waste. Conspicuouswaste was essentially a form of exploit directed against the industrial proc-ess itself. Because the ostensible purpose of labor was to contribute to thematerial well-being of humanity, the best way for an aristocrat to demon-strate his power over industry was to channel labor into actions that failedto improve human welfare. An aristocrat, for example, hired menial ser-vants and bought his wife expensive clothes that incapacitated her for labornot because these actions contributed to anyone’s physical happiness, butbecause such displays of wasted labor demonstrated his honor. A memberof the leisure class constantly had to waste at least as much as his neighbors


or he would risk losing his moral standing. This institution of “conspicu-ously wasteful honorific expenditure” demonstrated that the leisure classsought wealth primarily because it satisfied their “spiritual well-being”rather than “the ‘lower’ wants of physical well-being or sustenance only.”32

If the purpose of exploitation merely had been to satisfy the material needsof the exploiter, conspicuous waste would have been counterproductive andthe limits of exploitation would have been narrow. Because exploitationand the invidious moral prestige that it conferred on the aristocrat hadbecome teleological ends in themselves, however, the barbarian's capacityfor accumulation and oppression was as boundless as his desire for spiritualtranscendence.

For the leisure class, therefore, personal conflict between spiritualagents had become both the means and the end of economic endeavor.Humanity’s direct confrontation with the nonteleological environment,either in the production of physical goods or in the satisfaction of physicaldesires, came to seem vulgar to leisure class sensibilities. This exclusiveemphasis on interpersonal struggle meant that leisure class schemes ofknowledge focused almost exclusively on teleological agents and that “thevulgar facts of industry [were] beneath the dignity of a feudalistic deity.”The purest version of leisure-class philosophy, according to Veblen, wasmedieval scholasticism, “in which the imputed degree of nobility and pre-potency of the objects and the symbolic force of their names are lookedto for an explanation of what takes place.”33 Scholasticism assumed thatall of the objects in the universe shared the aristocrat’s obsession with “re-lations of personal mastery and subservience and the ideals of personalgain.” This thoroughgoing philosophy of invidious animism made the lei-sure class’s learning useless for the material survival of the community. Infully developed barbarian societies such as medieval Europe, the matter-of-fact knowledge necessary for the survival of civilization was maintained“only in the obscure depths of vulgar life among those neglected elementsof the population that lived below the reach of the active class struggle”34

The impersonal ideals of modern science were “more nearly akin to thespiritual life of the serfs and villeins than ... to the grange or abbey.”

So far, if this cultural analysis of leisure had been a purely historicalaccount of an extinct class, many defenders of capitalism in Veblen’s eramight have agreed with it. In fact, Veblen built his theory of barbariansociety largely on the sociological arguments of Herbert Spencer and Wil-liam Graham Sumner, two staunch defenders of laissez-faire capitalism.35

Like Veblen, Spencer and Sumner had argued that the moral and legalsystem of medieval Europe had focused on a man’s personal status andprestige rather than on abstract and impersonal laws. What made Veblen’sanalysis radically different from theirs, however, was his claim that the capi-

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talist institution of private property had originated in the barbarian era andcontinued to promote the predatory values of the leisure class rather thanthe scientific values of labor. According to Veblen, ownership was “the im-mediate function of the leisure class proper. . . . The conventional leisureclass and the institution of ownership as a conventional and equitable claimto extraneous things are results of the same economic force.”36 This asser-tion allowed Veblen to argue that the leisure class’s obsession with exploitpervaded modern capitalism in a way that Spencer and Sumner would havedenied. Whereas they believed that laissez-faire capitalism had replaced thestatus society of medieval Europe with a society based on impersonal con-tracts and natural law, Veblen argued that modern capitalism had univer-salized the spiritual conflicts of the aristocracy. By providing everyindividual in society with the opportunity to gain moral prestige throughthe accumulation of property, capitalism had incited a war of all againstall in which everyone sought to conquer his neighbors.

In order to make this argument, Veblen first had to demonstrate thatownership was social institution rather than a scientific fact of nature, asmany economists believed it to be. He argued that the idea of ownership–that one man to the exclusion of all others has the right to control a par-ticular physical object—was not implicit in the material facts of nature.Knowing about who owned an object did not provide the scientist withnew information about its matter-of-fact characteristics or about its indus-trial uses. Because ownership was thus irrelevant to the mechanistic se-quences of Darwinian science, it was a spiritual fact imputed to the physicaluniverse by human beliefs. It was “a conventional fact and has to belearned; it [was] a cultural fact which has grown into an institution in thepast through a long course of habituation.”37 Because ownership was a so-cial belief rather than a physical fact, a social scientist had to analyze own-ership in the same way that a historian or an anthropologist would analyzeany other system of beliefs. To understand the meaning of ownership, onewould have to ask why a culture would begin to impute this kind of spiritualrelationship between men and things.

Because the notion of dominance and subservience was implicit in theconcept of ownership, Veblen argued that it would have arisen only in thebarbarian era of culture when men had begun to think about human rela-tionships in terms of dominance and subservience. The idea of ownershipwould have made little sense in a savage era of society for two reasons.First, disputes about the distribution of ownership rights, an inevitable con-sequence of the institution of ownership for Veblen, would have been fatalto a society that depended so heavily on the cooperative production anddistribution of material goods. More importantly, savages would not haveimputed coercive social relationships between themselves and the objects


of the nonhuman world because the social relationships between humansavages themselves were so peaceable. A genial savage would be likely “toemphasize the peaceable, non-coercive character of the divine order ofthings.” Only in the barbarian era, therefore, when men began to think ofeach other as masters and servants, would they believe that inanimate ob-jects also could become their masters or their servants.

Within the barbarian era, Veblen traced ownership specifically to thesocial institutions in which the master/servant relationship had originated—slavery and patriarchal marriage. He speculated that early in the barbarianera groups of raiders would attack other communities to steal women andfood. While these early barbarians probably would have distributed the in-animate resources that they acquired equitably amongst themselves for thesake of their mutual survival, each warrior would have been tempted toexert exclusive control over his female captives. For a barbarian, the pros-pect of possessing a woman would have been much more attractive thanthe prospect of possessing inanimate articles of consumption. Becausewomen were clearly teleological agents, who had their own ends in life,“they [were] fit subjects for command and constraint; it minister[ed] to bothhis honor and vanity to domineer over them.”38 By bossing around his cap-tive wife, the warrior satisfied his cultural desire for exploit more immedi-ately than he could have done by owning land, tools, or food. At the sametime, his captives also became trophies, which demonstrated his prowessto his peers. After a long period in which the community became accus-tomed to keeping slaves, therefore, “the captor comes to exercise a cus-tomary right to exclusive use and abuse over the women he has seized.”Veblen argued that “this customary right of use and abuse over an objectwhich obviously is not an organic part of his person constitutes the rela-tionship of ownership, as naively apprehended.”39 The institution of own-ership thus began as a relationship between a human master and a humanservant, rather than as a relationship between people and things.

Once a society had become accustomed to thinking about human re-lationships in terms of ownership, however, they could begin to impute thesame kind of relationship to inanimate objects. Veblen argued that “it be-comes a relatively easy matter to extend this newly achieved concept ofownership to the products of the labor performed by the persons so heldin ownership.”40 Owners used the products produced by their slaves to sat-isfy their material needs, of course, but they were even more valuable “asa conspicuous evidence of his possessing many and efficient servants, andthey [were] therefore useful as an evidence of his superior force.”41 Even-tually, the fact that a man possessed many objects became a symbolic dem-onstration of his prowess even if it was not obvious that he had acquiredhis wealth through the domination of other agents. Owning and consuming

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the inanimate products of labor became a metaphorical means of owningand exploiting other human agents.

This argument turned the conventional economic analyses of slaveryand ownership on their heads. Because hedonist economists assumed thatconsumption was the teleological end of all economic action, they believedthat men took slaves primarily so that they could acquire the products ofslave labor. For them, the human relationship of slavery was simply a meansby which the master altered his relationship to the inanimate universe. Thismeant that it was possible to separate the institution of private propertyfrom exploitative relationships between people. For Veblen, in contrast, thehuman relationship of slavery was the teleological end-in-itself of owner-ship. Conspicuous consumption of the inanimate products of exploited la-bor was primarily a metaphorical means of demonstrating that one hadsuccessfully exploited another agent. This meant that, for Veblen, it wasimpossible to separate the institution of ownership from coercive relation-ships between human agents. In a peaceable and cooperative society, themetaphorical ownership of inanimate objects would cease to make sensebecause it would no longer be necessary to demonstrate one’s honor andprowess. Although the cruder forms of slavery had been eliminated in mo-dem capitalism, therefore, Veblen argued that the goal of the capitalist inhis quest for property still was to achieve dominance over other membersof his society. The primary difference between the modern businessmanand the barbarian was that businessmen usually obtained their propertyand prestige through pecuniary exploits in the marketplace rather thanthrough physical exploits of military combat.

This spiritual analysis of the motives of accumulation explained whythe quest for wealth seemed to be so insatiable even in a modern industrialsociety that had vastly increased its capacity to produce material goods.Because the desire for wealth was inherently competitive, no absoluteamount of physical property would ever give a man satisfaction. If a manhad less wealth than most of his neighbors, he would “live in chronic dis-satisfaction with his present lot,” but if he were lucky enough to reach theaverage level of wealth in his community,

this chronic dissatisfaction will give place to a restless striving to place a wideningpecuniary interval between himself and this average standard . . . . [T]he desire forwealth can scarcely be satisfied in any individual instance, and evidently a satiationof the average or general desire for wealth is out of the question. However widelyor equally, or ‘fairly,’ it may be distributed, no general increase of the community’swealth can make any approach to satiating this need, the ground of which is thedesire of everyone to excel everyone else in the accumulation of goods.”42

For Veblen, therefore, the economic conflict and competition characteristicof the marketplace were not the means by which a capitalist economy dis-


tributed resources efficiently but the teleological end in itself of the systemof private properly. Through the metaphor of property, everyone in modernsociety tried to become as selfish, wasteful, and oppressive as the traditionalleisure class.

Having described property as a leisure class institution consistent withthe aristocrat’s disdain for productive labor, Veblen still had to explain whymodern businessmen and economists had come to believe that ownershiprights promoted labor. In the twelfth century, when “the fact of a person’sbeing engaged in industry was prima facie evidence that he could own noth-ing,” Veblen’s analysis of property might have coincided with contemporarycommon sense. In nineteenth century, however, most businessmen wouldhave been insulted by the suggestion that they had obtained their wealththrough exploitation rather than through industrial service. Veblen thus hadto explain how the businessman’s belief that ownership was the result ofindustry had arisen out of aristocrat’s distinction between ownership anddrudgery. Veblen’s effort to provide this explanation led to his analysis ofthe handicraft era that came between the barbarian era and the era ofbusiness enterprise. The handicraft era was a “hybrid growth,” accordingto Veblen, which produced the hybrid social philosophy of “natural rights”that led to the confusion between facts and values characteristic of modembusiness enterprise.

According to Veblen, European handicraft production originated withthe “masterless men” who escaped from the control their feudal lords inthe late-medieval period by moving into protected cities. By becoming acraftsman and selling his products in the petty markets that arose in thisera, the masterless man could achieve a certain measure of economic in-dependence from the feudal system. Because the handicraft worker wassimultaneously creating useful objects and selling these objects in the mar-ket, Veblen argued that “the habitual outlook and bias given by the handi-craft system are of a twofold character—technological and pecuniary.”43 Inorder to succeed, the handicraft worker had to combine a capacity forworkmanship with a capacity for salesmanship. Like the medieval slave, hecreated useful objects out of inert material, but like the medieval priest,he manipulated the spiritual agents that he encountered in the marketplacethrough subtle forms of force and fraud. Because handicraft work thus com-bined the impersonal workmanship of savages with the spiritual exploits ofthe aristocracy, Veblen described it as a “qualified or mitigated (sophisti-cated) return to the spirit of savagery.”44 The new cultural emphasis onthe technological uses of matter-of-fact sequences led to the tremendousincrease in productive power that marked the modern era. At the sametime, however, the new emphasis on the pecuniary manipulation of man

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by man led to the system of business enterprise, which would eventuallywaste much of this increase in the quest for invidious honor and prestige.

The “natural rights” social philosophy that corresponded to this dual-istic bias of handicraft labor also was a “hybrid growth, a blend of personalfreedom and equality, on the one hand, and prescriptive rights on the otherhand.”45 The preconceptions of natural rights eliminated all of the privi-leges, rights, and invidious distinctions of the feudal class system—exceptthe rights of property. To the handicraft worker, the privileges of property,unlike other aristocratic privileges, seemed inviolable because they ap-peared to come directly from man’s relationship to nature rather than fromhis relationship to other men. From the perspective of a handicraft worker,ownership was

a ‘natural right,’ in the sense that what a man has made, whatsoever he has mixedhis labor with, that has thereby become his own to do with it as he will. He hasextended over and infused into the material of his work something of that discre-tionary force and control which in the nature of things, the masterless man of rightexercises in the movements of his own person . . . Natural ownership is workman-ship wrought out and stabilized in a material object.46

The masterless man was thought to own the products of his own labor inthe same way that the slave master owned the products of his servant’slabor. This idea lay at the heart of the classical labor theory of value; itsuggested that the property possessed by a handicraft worker was morallyequivalent to the amount of industrial labor that he had performed.

From Veblen’s perspective, this idea was anomalous from the start,and he thought that it was the foundation of the modern confusion betweenfacts and values. For Veblen, the consequences of industrial labor neces-sarily were mechanistic rather than personal or pecuniary. Labor was aneffort to modify the inanimate environment in order to achieve an imper-sonal end such as a functioning clock or a bountiful harvest. Because work-manship sought to alter the impersonal sequences of nature, itsconsequences had to be measured in the matter-of-fact terms of sciencerather than in the personal terms of value and property. A man acquiredproperty, in contrast, through his personal interactions with other peoplein society rather than through his workmanlike relationship with the inani-mate universe. To say that the industrial work performed by a laborer wasequivalent to the value of property that he had acquired was to confusehis pecuniary relationship to other men with his industrial relationship tothe inanimate universe. Thus, natural rights falsely identified the exploitscharacteristic of the leisure class with the drudgery characteristic of indus-trial workers. By doing so, it “contaminated” the instinct of workmanship“with the ideal of self-aggrandizement and the canons of invidious emula-tion.” Under this system, “even the serviceability of any given action or


policy for the common good comes to be rated in terms of the pecuniarygain which such conduct will bring to its author.”47

Despite these inherent ambiguities, Veblen argued that the system ofnatural rights initially helped to stimulate labor and to protect workers.During the early handicraft era when the material equipment required forindustrial production was inexpensive, many individual workers were ableto acquire them, and the right to own their means of production gave thema measure of independence from aristocrats. As the technological progressstimulated by the new emphasis on workmanship began to replace handi-craft industry with machine technology, however, the aristocratic heritageof the rights of ownership reasserted itself. Unlike handicraft production,modem machine production generally required large and expensive fixedequipment. It also required a large body of workmen to work interdepen-dently rather than independently. When this integrated system of produc-tion was combined with the individualistic moral and legal system basedon the natural rights of property, those who owned again began to be sepa-rated from those who worked. Generally, a few merchants and mastercraftsmen gained control over the expensive instruments of production andhired other workers as wage laborers. This produced an increasingly widedifferentiation between workers and owners “which grew into a ‘divisionof labor’ between industry and business, between industrial and pecuniaryoccupations—a disjunction of ownership and its peculiar cares, privileges,and proficiency from workmanship.”48 Consequently, the social structureof modern society was becoming remarkably similar to the social structureof medieval Europe. A large group of industrial workers produced the ma-terial goods required by society while a small leisure/business class focusedon spiritual conflict in the marketplace and wasted the excess productionof labor in invidious displays of honor.

Like the spiritual occupations of traditional leisure class, the pecuniaryoccupations of businessmen focused on the manipulation of people ratherthan on the manipulation of things. “The sagacity characteristic of the pe-cuniary employments is chiefly a sagacity in judging what persons will doin the face of given pecuniary circumstances.”49 Furthermore, businessmenusually profited from these personal transactions through force and fraud,as had the traditional aristocrats. Generally, they employed force with theiremployees and fraud with their customers. Although the business classlacked some of the legal and conventional powers that the traditional lei-sure class had exorcised over its slaves, the rights of property gave busi-nessmen the balance of power in wage bargains. Because the ownershiprights of businessmen allowed them to control access to the essential piecesof equipment required in the industrial process, they had the power to cre-ate unemployment or to sabotage production unless industrial workers

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agreed to their terms. The increased freedom of the modern worker andthe tremendous productivity of modern technology made it difficult for thebusiness class to waste all of the excess production of modern industry, butthey came close to the standards set by the medieval leisure class.

At the same time that businessmen acquired power similar to that ofmedieval lords over their workforce, they also were acquiring power similarto that of the medieval church over their customers. Veblen often comparedthe advertisers employed by modern corporations to the “salesmen of thefaith” employed by other religious institutions. In a particularly bitter pas-sage of Absentee Ownership, Veblen suggested that there was little differ-ence between the indulgences and relics produced by the medieval churchand consumer products produced by modern corporations. He claimed that

the propaganda of the faith is quite the largest, oldest, most magnificent, . . . andmost lucrative enterprise in sales-publicity in all Christendom. ... No pronounce-ment on rubber-heels, soap-powder, lip-sticks, or yeast-cakes, not even SapphiaBuncombe’s Vegetative Compound, are yet able to ignore material facts with thesame magisterial detachment, and none has yet commanded the same unreasoningassent or acclamation.50

Like ancient priests modern advertisers sought to transform the spiritualanxieties of the population into an economic asset. They enhanced the sal-ability of their commodities by imputing magical powers to them so thatthey could relieve the stresses and satisfy the dreams provoked by modernlife. Although salesmen had not yet become as successful in ignoring thematerial facts of life as had traditional preachers, their aims and methodswere the same. Veblen noted that “it is of the nature of sales-publicity topromise much and deliver a minimum. . . . Worked out to its ideal finish,as in the promises and performances of the publicity agents of the Faith,it should be the high good fortune of the perfect salesman in the secularfield also to promise everything and deliver nothing.”51

As businessmen became like modern aristocrats, however, the continu-ing influence of natural rights theory prevented them from acknowledgingthat they were exploiting industry rather than aiding it. A modern capitalistcould not denigrate industry like an old-fashioned aristocrat because natu-ral rights theory suggested that his property rights were legitimate only ifhe had somehow produced his fortune through his own labor. Althoughthe vast private fortunes accumulated by modem captains of finance madethis idea seem ridiculous from the materialistic perspective of modern sci-ence, economic theory helped businessmen to maintain their faith. Politicaleconomy offered businessmen a mythology of “production” that completelyignored the industrial process of producing material goods so that theycould believe that acquiring property rights was the moral and spiritual


equivalent of creating useful objects. As Veblen argued in The Theory ofBusiness Enterprise,

The institutional animus of ownership, as it took shape under the discipline of earlymodern handicraft, awards the ownership of property to the worker who has pro-duced it. By a dialectical conversion of the terms, this metaphysical dictum is madeto fit the circumstances of later competitive business by construing acquisition ofproperty to mean production of wealth; so that a businessman is looked upon asthe putative creator of what he acquires. By force of this sophistication, the acqui-sition of property by any person is held to be, not only expedient for the owner,but meritorious as an action serving the common good.52

This myth was the intellectual foundation of business metaphysics. It wasJohn Bates Clark’s natural law of distribution, which gave to every agentin the economy exactly what he had produced. By transforming the pecu-niary exploits of modern businessmen into acts of industrial service, eco-nomic mythology completely replaced objective facts of modern industrywith the moral values implicit in the natural rights of property.

The main alternative to this metaphysics of business in modern societywas science and the “discipline of the machine.” At the same time thatthe business class was beginning to focus almost exclusively on the spiritualrealm of market transactions, the machine process was teaching the work-ing class to think like Darwinian scientists. Workers did engage in pecuniarytransactions to some extent because they bargained over their wages andhad to buy their supplies in the marketplace, but they spent most of theirtime on the job. At work, the primary goal of the industrial employee wasto make the industrial process operate as efficiently as possible. This meantadopting the preconceptions of modern science because:

the machine process compels a more or less unremitting attention to phenomenaof an impersonal character to the sequences and correlations not dependent fortheir force upon human predilection nor created by habit and custom The machinethrows out anthropomorphic habits of thought. If (the worker) takes to myth mak-ing and personifies the machine or the process and imputes purpose and benevo-lence to the mechanical appliances ... he is sure to go wrong.53

Just as scientists were eliminating nonhuman spiritual agents from theiraccount of the universe, the machine process was eliminating teleologicalbeliefs from the experience of industrial workers. This meant that the mythsof political economy and the quasi-personal relationship between an ownerand his possessions that had become so important to businessmen werebecoming meaningless to modern engineers and industrial laborers in theirdaily work.

At the same time, machine technology was also was destroying thearistocratic assumption that all men were engaged in a perpetual compe-tition for prestige and honor. Veblen argued that machine process createdan “industrial republic,” in which the individualistic values of the leisure

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class were counterproductive. In the modern process of production, differ-ent industries were dependent on cooperation with each other, and “thehigher the degree of development reached by a given industrial community,the more comprehensive and urgent becomes this requirement of intersti-tial adjustment.”54 Conflicts and disturbances at any point in this industrialprocess tended to disrupt the system for everyone. This encouraged “soli-darity in the management of the entire industrial traffic of the community.”Consequently, the businessman’s tendency to think in terms of competitionand conflict, like his tendency to impute anthropomorphic relationships tothe physical world, was alien to the habits of thought inculcated by modemtechnology. Veblen believed—or hoped—that the habituation of workersto this modem process of production eventually would convince them thatthe rights of property were as meaningless as the other aristocratic privi-leges that the masterless men had eliminated. This would allow them todevelop a social order based on the point of view of Darwinian sciencerather than on the mythology of natural rights.

BUSINESS CRISES

So far, then, we have argued that Veblen saw a growing cultural con-flict in modern society between businessmen who focused on the domina-tion of people and industrial workers who focused on the manipulation ofthings. The most telling economic consequence of this conflict were thebusiness crises and depressions that characterized modem capitalism. Dur-ing a business crisis, much of the industrial equipment and many of theindustrial workers in a society were idle at the same time that the materialneeds of a large portion of the population remained unsatisfied. This wasa phenomenon unique to the modern system of business enterprise. Al-though premodern societies often had suffered through famines, they hadnot experienced privation while they were surrounded by industrial equip-ment that could produce what they needed. These crises were importantto Veblen’s analysis of modern society because they demonstrated that “theexercise of free contract, and the other powers inhering in the natural rightof ownership are incompatible with the modem machine technology.”55

They occurred because the businessman’s desire to maximize his pecuniaryincome often came into conflict with the industrial workers’ desire to maxi-mize physical production. Eventually, Veblen believed that the friction pro-duced by depressions of increasing severity and length would destroy thehybrid combination of business and industry characteristic of the system ofbusiness enterprise.


In order to understand Veblen’s explanation of business crises, we needto understand his theory of capital. Veblen argued that there were two dis-tinct ways of measuring the utility of a capital good in modern society.From the perspective of the industrial worker or of the community at large,a capital good was an instrument required in the process of material pro-duction. From the perspective of the businessman, however, capital was ameans of acquiring a pecuniary income. Businessmen used their pecuniarycontrol over essential tools to dominate the process of industry and to ex-ploit workers and consumers. For them, the utility of a capital good de-pended, not on its productive efficiency, but on its “earning potential” orits ability to divert the largest possible share of ownership rights into thehands of the businessman. Veblen argued that

capital pecuniarily considered rests on a basis of subjective value; capital industriallyconsidered rests on material circumstances reducible to objective terms of mechani-cal, chemical, and physiological effects.56

Pecuniary capital was psychological or subjective because it was valuableto the extent that it enabled the capitalist to dominate other teleologicalagents. Industrial capital, in contrast, could be measured in matter-of-factterms because it was useful to the extent that it helped the community toalter the inanimate environment. Because conventional economic mythol-ogy had identified the process of acquiring property rights with the processof producing material goods, conventional economists had failed to per-ceive this distinction between industrial and pecuniary capital.

According to Veblen, this explained why they had failed to develop anadequate theory of business crises. Depressions were phenomena of busi-ness, “of price, earning, and capitalization” rather than of “the mechanicalfacts of production and consumption.” Crises occurred, not because a so-ciety had somehow lost the industrial capital required to satisfy its materialneeds, but because businessmen were no longer able to make an adequateincome on their pecuniary investments. They were “maladies of the affec-tations” during which businessmen “did not see their way to derive a sat-isfactory gain from letting the industrial process go forward on the linesand in the volume for which the material equipment is designed.”57 Thishappened when there was a “discrepancy between that nominal capitaliza-tion which (businessmen) have set their hearts upon through habituationin the immediate past and that actual capitalizable value of their propertywhich its current earning-capacity will warrant.”58 In order to understandbusiness crises, therefore, one had to understand how and why the pecu-niary value or the earning potential of capital investments would suddenlydecrease for many capitalists throughout the economy. Veblen argued thatthere were two ways that this happened. Either a period of business pros-

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perity briefly inflated the value of pecuniary capital, leading to a crisis whenthe era of prosperity ended, or the rapid progress of industry depreciatedthe pecuniary value of investments faster than businessmen had anticipated.

Business crises caused by inflation had occurred frequently between1817 and 1873, a period marked by several cycles of boom and bust. Ac-cording to Veblen, some form of wasteful extra-industrial expenditure thatincreased the demand for industrial products and raised prices generallyhad initiated the booms in this period. He noted that war, the preparationfor war, and the protective tariff all had been effective means of creatingbusiness prosperity during the nineteenth century. All of these actionswasted resources and produced inefficiencies from the perspective of in-dustry, but they increased the demand for vendible products, which wasgood for business. Famines, droughts, and other large-scale natural disasterswould have had a similar stimulating effect according to Veblen’s theory.When an extraindustrial event of this sort raised prices dramatically in aparticular industry, the earning potential and therefore the capital value ofits existing investments increased. Since modern businessmen measured thevalue of a company by predicting how much profit it would earn, risingprices increased the assets of a corporation without increasing its supplyof physical capital. Once the nominal capital value of a company had in-creased, however, it had more collateral, which allowed it to increase itscredit and to expand its operations in an effort to earn even more profits.As the corporations initially effected by inflation expanded their operations,they bought more supplies thereby increasing the demand for products pro-duced by other businesses. This lead to a cycle of higher prices, increasedcredit, and expanded operations that could spread prosperity to business-men throughout the economy.

Such an era of business excitement would continue as long as thewasteful disturbance kept up prices, and it often continued for a while afterthe disturbance had ceased. For a certain period, inflation could increasethe profits of the business class, in general, because of “the relatively slowadvance in the cost of labor during an era of prosperity.” Veblen arguedthat:

wages ordinarily are not advanced at all for a considerable period after such anera of prosperity has set in; and so long as the eventual advance of wages does notovertake the advance in prices ... so long, of course, a differential gain in theselling prices accrues, other things equal, to virtually all business enterprises.59

Although wages lagged behind other prices, workers did benefit from busi-ness prosperity to some extent because they could find more work andlonger hours at their previous rate of wages. Once the excess supply ofunemployed labor had been absorbed into the economy, however, wagesbegan to rise and the era of prosperity quickly ended for businessmen.


Higher wages increased the costs of production for businessmen throughoutthe economy thereby lowering the pecuniary value of capital assets. Justas higher prices for commodities increased the capital value of a businesswithout increasing its industrial resources, higher wages decreased its capi-tal value without decreasing its industrial resources.

This decrease in the value of pecuniary capital not only ended the eraof prosperity but lead to a crisis because businessmen had made loans andinvestments based upon the inflated capital values created by prosperity.As wages rose:

the rate of earnings falls off; the enhanced capitalization based on enhanced puta-tive earnings proves greater than the earnings realized or in prospect on the basisof an enhanced scale of expenses of production; the collateral consequently shrinksto a point where it will not support the credit extension resting on it in the wayof outstanding contracts and loans.60

The decreased earning potential of capital thus made it impossible for manybusinessmen to pay interest on their loans, which were based on the inflatednominal value of their assets rather than on its current earning potential.Loans that had seemed conservative during prosperity began to look “un-wise,” and creditors began to call in their debts. Eventually, to a greateror lessor extent, liquidation ensued, and the industrial resources of theeconomy—with a lower pecuniary value—were concentrated in the handsof fewer and fewer creditors.

From the perspective of industry, there was no reason why such a“business” crisis also should lead to decreased material production. In alllikelihood, the industrial capacity and efficiency of the economy had in-creased during the period of prosperity. Although workers were receivinghigher wages by the end of the boom, they obviously were not receivingmore goods than they needed or could produce. Furthermore, althoughprofit rates were decreasing, the material standard of living for most capi-talists did not need to decrease. Few businessmen had to experience “hard-ship in the way of a reduced command over the material means of theproduction, of life, or of comfort.”61 The problem was that “business en-terprise . . . proceeds on metaphysical grounds and is swayed by consid-erations of nominal wealth rather than material serviceability.”62 Whatmattered to a businessman was his social prestige, and “a businessman’srating in the business community . . . [rested] on the pecuniary magnitudeof his holdings and his transactions, not on the mechanical serviceabilityof his output.”63 This meant that businessmen considered a reduction inthe value of their capital assets “a hardship” even if it failed to cause areduction in their material standard of living. They sensed that there wassomething horribly wrong with an economic world that prevented themfrom earning the rate of profit that they had come to expect during the

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era of prosperity. Thus, industrial production, although it was still requiredfor the material well being of society, no longer seemed to be worthwhilefrom immaterial perspective of business. Businessmen stopped investingcapital and producing goods until some new kind of wasteful stimulus ledto another boom. Because “business metaphysics [controlled] the course ofindustry,” therefore, the spiritual anxieties of the business class often had“grave consequences for industry and for the material welfare of the com-munity.”64

Although cycles of prosperity and crisis, as described above, had oc-curred regularly in the mid-nineteenth century, Veblen argued that Ameri-can business enterprise had been mired in a longer and more serious slumpsince the 1870s. Since 1873, according to Veblen, businessmen had sufferedthrough a long period of depressed profits that had been interrupted onlyby short and infrequent booms.65 Veblen believed that this long businessslump, which coincided with an era of tremendous industrial progress, dem-onstrated that “chronic depression, more or less pronounced, is normal tobusiness under the fully developed regime of the machine industry.”66 Thiswas true, according to Veblen, because the tremendous rate of technicalprogress in modern industry often destroyed the pecuniary hopes of busi-nessmen all by itself. Like the cycle of boom and bust, technological pro-gress tended to cause a discrepancy between the nominal capital value ofa business enterprise and its current earning potential.

Perhaps we can best illustrate how the constantly increasing efficiencyof the modern industrial system decreased the earning potential of pecu-niary capital, according to Veblen, by looking at the experience of a singlehypothetical investor. When Capitalist A invests in a particular machine orprocess, he expects it to provide a certain rate of pecuniary return as longas it is industrially useful. This expected rate of return determines the capi-tal value of his investment. If a more efficient method of production isdiscovered while Capitalist A is still using his original equipment, however,Capitalist B, who invests in up-to-date technology, can expect to make thesame rate of profit at lower prices. Competition thus reduces prices so thatthe earning potential of Capitalist As investment decreases. Although nomechanical disaster has decreased the serviceability of Capitalist As indus-trial equipment, his pecuniary capital has decreased below its nominalvalue. He no longer can earn the rate of profit that he expects, and hemay not be able to pay off his loans, which are based on the original valueof his investment. From the pecuniary perspective of Capitalist A, industrialprogress has “destroyed” his capital.

Although the industrial destruction of pecuniary capital had happenedoccasionally before the advent of machine industry, Veblen argued that the


rapid pace of technical progress since the 1870s made it a perpetual prob-lem for businessmen. He argued that

from the inherent character of the machine industry itself ... it follows that theearning capacity of any industrial enterprise enters on a decline from the outset,and that its capitalization, based on its initial putative earning-capacity, grows pro-gressively antiquated from the start.”67

Because industrial equipment constantly tended to lose its ability to gen-erate pecuniary profits before it ceased to be useful as a means of produc-ing material goods, progress created a perpetual discrepancy between theinitial nominal value of capital investments and their current value.

From the perspective of industry, of course, Veblen believed that therewas no reason why this perpetual loss of pecuniary value should lead toindustrial unemployment. As productive as the modern machine processhad become, it could not produce more things than men could consume,especially in a capitalist society that wasted so much of its production onwarfare and conspicuous consumption. This meant that there was no ma-terial reason to abandon a functioning piece of industrial equipment whenmore efficient models were developed. People who use industrial appliancessuch as refrigerators or stoves at home, for example, do not immediatelydispose of functioning machines when more efficient versions become avail-able on the market. They may try to acquire the best machine that theycan find when their current equipment breaks down, but there would beno reason to destroy a useful appliance simply because someone else hasanother appliance that was even more useful. Similarly, if economic pro-duction were based on the material needs of industry alone, there wouldbe no reason to abandon dated machinery unless the people using thesemachines could satisfy more urgent needs of the society by working else-where.

Because businessmen were interested in maximizing profits rather thanmaximizing production, however, the destruction of pecuniary capitalseemed disastrous from their perspective. In order for a businessman tocontinue operating industrial equipment that was not state-of-the-art, hehad to acknowledge that its earning potential had decreased. Businessmenwere loath to do so for two reasons. In the first place, if the differentialearning-potential of his equipment declined drastically, there was a goodchance that a businessman no longer could meet the fixed interest pay-ments on his credit. This would lead to bankruptcy. In the second place,all businessmen, both the creditors, who gained material equipment duringa depression, and debtors, who lost it, simply detested to admit that theirpecuniary magnitude had decreased for all of the spiritual reasons men-tioned above. For businessmen, therefore, the incessant pace of modemindustrial progress created an unattractive market situation that they de-

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scribed as “over-production” or “cut-throat competition.” These terms didnot mean that the economy was producing too much or that businessmenhad become more ruthless and competitive than normal. They simplymeant that too many businesses were unable to earn “a fair rate of profit”when they had to compete against state-of-the-art equipment at the currentlevel of prices. Eventually, if unrestrained industrial progress were allowedto continue, prices got so low that many businessmen no longer consideredproduction worthwhile. By shutting down insolvent factories and laying offworkers, however, they only aggravated their problem. Unemployment de-creased the demand for vendible products and made it even more difficultfor continuing businesses to earn a profit.

Because these depressions caused by industrial progress were becom-ing perpetual in a modem industrial economy, Veblen argued that “the fulldominion of business enterprise is necessarily a transitory dominion.” Even-tually, the economic pressure of perpetual business depressions wouldeliminate one of the “two divergent cultural tendencies” that clashed witheach other in a business society. The hybrid combination of natural rightsand scientific progress, of business and industry, which had characterizednineteenth-century American culture, could not survive for very long in thetwentieth century. Either the aristocratic ideals of business would producea modem dynastic state, in which scientific and industrial progress woulddecline, or an industrial republic would finally liberate the instinct of work-manship from the institution of ownership.

If a dynastic state did follow the era of business enterprise, it wouldcome through the efforts of businessmen to respond to depression. Fromthe perspective of business, the two most effective responses to depressionwere monopoly and war. Monopoly power allowed businessmen to maintainthe profitability of older investments by slowing the pace of innovation andrestricting competition. The wave of corporate mergers that was occurringwhile Veblen wrote The Theory of Business Enterprise at the turn of thecentury was a largely successful attempt to achieve this kind of monopolypower. Veblen believed, however, that monopolies would have to becomelarger and larger in order to eliminate competition as the industrial econ-omy became increasingly interdependent and as the amount of pecuniarycapital seeking profitable investments accumulated. This meant that controlover the production process would have to concentrate in the hands offewer and fewer pecuniary magnates. War also helped to maintain the prof-itability of modem business enterprise because it was the most effectivemeans of wasting resources and increasing demand. Imperialism, which alsowas on the rise at the turn of the century, created business prosperity bymaintaining domestic demand through military expenditures that destroyedthe excessive production of machine industry. As a nation’s leaders increas-


ingly trained its people for war, however, Veblen believed that they wouldbecome more belligerent and superstitious and therefore less suitable forscientific and industrial occupations. As pecuniary power concentrated inthe hands of a few monopolists and as the community increasingly focusedon invidious warfare, the ambiguous moral code of natural rights wouldcompletely degenerate into the barbarian moral code of honor and prowess.Even the illusionary and half-hearted respect for science and industry char-acteristic of the nineteenth century would disappear in a repressive modernstate geared for war.

If, in contrast, an industrial or socialist republic were to replace thesystem of business enterprise, it would come because workers simply hadlost their faith in pecuniary values. From Veblen’s perspective, the powerof modern businessmen resembled the power of priests more than it re-sembled the power of warriors. In the end, the business class depended onthe myth of ownership and the metaphysics of natural rights more than itdepended on direct physical coercion. Because the privileges of ownershipwere extraneous to the physical process of production, businessmen wouldsoon become impotent if industrial workers, as a group, stopped believingin their mythologies. At some point during a depression, industrial workerscould decide that it was ridiculous to sacrifice the material efficiency andwell being of the community in order to maintain the pecuniary magnitudeof the captains of finance. Once the spell of ownership was broken, theycould operate the machinery of modern industry for their own purposesrather for the spiritual satisfaction of the owning class. In The Engineersand the Price System, Veblen speculated in some detail how such a transitionmight take place, but the essential factor was always the “spiritual attitude”of industrial workers. Ultimately, the fate of the twentieth century de-pended on whether common men believed in the moral values promulgatedby businessmen and imperialists or in the vulgar facts that they confrontedeveryday at work.

DEMENTIA PRAECOX

Much to Veblen s dismay, Americans seemed to be choosing myth overfact during the final decade of his life. After allowing himself to hope thatWorld War I and the Russian Revolution might make the world safe forsocialism, a disappointed Veblen sensed that American society had become“something of a psychiatric clinic” in the 1920s. In an era of “business asusual,” the American legion, the Ku Klux Klan, and the Lusk Commission,American culture seemed to be “breaking down into the systematized il-lusions of dementia praecox.” Veblen complained that “the logical faculty

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appears to have suffered a notable degree of prostration throughout theAmerican community; and all the while it is the more puerile crudities ofsuperstitious fear that have been making particular and inordinate gains.”68

As Veblen looked forward into the twentieth century at the end of his life,the fear of a neo-feudalistic state legitimized by a culture of fantasy anddeception loomed large in his imagination.

In many ways, of course, the “American Century” has borne out Ve-blen's worst fears. No century has been more prolific in its waste of humanlife. None has been more extravagant in its waste of industrial resourcesto the point where we may destroy the material foundations of human ex-istence in our search for immaterial profits. Public culture in the twentiethcentury has become obsessed with the magical logic of advertising and in-vidious displays of prowess in sports, warfare, and business. The privilegesof property have further contaminated the rhetoric of democracy as therights of ownership have concentrated in the hands of fewer and fewermen. Our public culture in this century might well be described-as a kindof dementia in which the words and images we employ to describe oursociety have become alienated from the material facts that shape our ex-perience.

In other ways, however, Veblen’s fears appear to have been exagger-ated. Scientific progress and industrial development have not been stifled,as Veblen feared that they would be in a neobarbarian state. At the sametime that the twentieth century has become the most wasteful century inhuman history, it also has become the most productive and efficient. Sci-entists have continued to make new discoveries in physics, chemistry, biol-ogy, and medicine while the industrial system has become an ever moreefficient and interdependent means of producing useful goods. It seemsthat the metaphysics of business enterprise have continued to flourish inthe midst of the machine process that Veblen believed would either destroyor be destroyed by business. At the end of the twentieth century, Americanculture has not made that final choice between the illusions of businessand the facts of industry that Veblen considered immanent the beginningof the century. The continuing coexistence of these “two divergent culturaltendencies” indicates that they may be more compatible than Veblen be-lieved. Although business and industry are not identical, as the classicaleconomists assumed, they are not always the hostile enemies that Veblenportrayed them to be either. In the experience both of the businessmanand the worker, business and industry often have reinforced each other inways that Veblen failed to anticipate.

In his analysis of business enterprise, for example, Veblen perceptivelyobserved that the desire to maximize profits was not synonymous with thetechnical requirements of maximizing production. As we have demon-


strated, this distinction allowed Veblen to show how industrial progresscould lead to business depressions for rational business reasons that con-ventional economists could not explain. Yet, Veblen underestimated the ex-tent to which the profit motive would continue to spur technologicalinnovation in the twentieth century. Businessmen still can acquire an in-vidious differential advantage over their competitors by increasing the ef-ficiency of production process that is under their control or by acquiringthe rights to technological innovations. Although technological advancesdestroy the pecuniary capital of some businessmen, they often produce vastfortunes for others. Veblen’s desire to purify the process of production byisolating it completely from the profit motive led him to ignore this complexinterrelationship between profits and production. This prevented him fromanticipating that the continuing dominance of the business class could cor-respond to increasing industrial efficiency as it has—through the twentiethcentury at least.

In his analysis of the modern worker, also, Veblen failed to see thatthe machine process could reinforce rather than undermine pecuniary val-ues. Although Veblen believed that modern industry inculcated scientifichabits of mind, one could argue that it makes the modern proletarian evenless likely to think in materialistic terms than the handicraft worker did.Often a modern factory worker needs to know much less about the indus-trial process of production than did the handicraft worker. A shoemakerwho makes shoes from scratch needs to know more about leather, knives,and nails, than an industrial worker who performs a simple and repetitiveact without knowing how it fits into the larger process of production. Incontrast to Veblen’s arguments, therefore, the work experience of a modernlaborer often leaves him freer to develop magical ideas about material pro-duction than did the work experience of a handicraft worker. In fact, theroutine nature of factory labor often makes the modern proletarian evenmore likely to think of his labor in strictly pecuniary terms. Because workhas become so pointless and alienating for so many workers, they have lessinterest in the impersonal ends that their labor seeks to accomplish thanin the pecuniary wages that they receive from their employers. This suggeststhat the modern machine process, which Veblen saw as an antidote to thepreconceptions of business enterprise, often reinforces these preconcep-tions.

Veblen failed to recognize that capitalism often makes labor irksomenot only by making it a sign of social inferiority but also by transformingthe physical process of labor into a degrading routine. Veblen consideredthe “discipline of the machine” benign because it was imposed on theworker by the impersonal laws of nature rather than by other humanagents. In the work experience of the modern proletarian, however, the

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objective discipline imposed on him by industrial facts often becomes in-distinguishable from the personal discipline imposed on him by businessmanagers and “efficiency experts.” By controlling the machinery of pro-duction, capitalists not only determine if and when the worker will be al-lowed to work, as Veblen argued, but they also determine the nature andthe process of labor. The businessman can control pace of a worker’s laborby controlling the speed of his machines, and he can determine the skills—or lack of skills—that the worker will need to develop by his choice ofindustrial processes. When analyzing the process of distribution in a capi-talist society, Veblen perceptively recognized that the system of privateproperty allowed businessmen to employ inanimate objects as a means ofcontrolling other human agents. By offering the “impersonal” process ofproduction as the alternative to the “personal” process of distribution, how-ever, Veblen failed to see that the capitalist’s ambiguous power existedwithin the realm of production as well as in the realm of distribution. Thus,the industrial process by itself has not provided workers with an escapefrom the perverse values of business.

By suggesting that impersonal science and industry are not completeas alternatives to business enterprise, these arguments bring us back to thequestions of waste and morality with which we started. At the beginningof the essay, I suggested that, by employing the concept of “conspicuouswaste” in his theory, Veblen was making an implicit moral judgment aboutthe teleological ends that society ought to achieve. One cannot describean action as wasteful or efficient unless one knows what an actor ought toaccomplish. From the amoral perspective of Darwinian science, which stud-ies the blind accumulation of impersonal causes and effects, “waste” hasno meaning. Because the scientist assumes that nature has no purpose, hecannot describe natural events as wasteful or efficient. From the perspectiveof industry, also, the concept of social waste makes sense only if one knowsthe teleological ends that society ought to seek. The engineer can deter-mine whether a process is efficient only if he knows the purpose of thatprocess. By calling business and leisure wasteful, therefore, Veblen wasmaking a moral judgment about the social values that were most beneficialto human well being. According to Veblen, business enterprise, in its questfor pecuniary value, undermined all of the other possible ends that societymight seek to accomplish, such as the quest for universal human welfare,scientific truth, or artistic beauty. In a business society, all of the excessproduction of human industry was employed in the businessman’s battlefor invidious prestige and honor rather than for these generic human ends.By arguing that the competitive values of business were not inherent inhuman nature, Veblen exposed the contradictions in the conventionaleconomists’ effort to employ their supposedly “value neutral” science as a


means of justifying business enterprise. Nevertheless, by calling businessvalues “wasteful” Veblen himself also was making a moral judgment aboutbusiness rather than offering a scientific analysis of it.

In his effort to prove that he used the term “conspicuous waste” as ascientific concept rather than a moral judgment, Veblen argued that ashared idea of waste was inherent in a society’s perception of the world:

There is a good deal of a consensus as to what manner of things are wasteful. Thebrute fact that the word is current shows that. Without something of a consensuson that head, the word would not be intelligible; that is to say, we should have nosuch word . . . . It is because men’s notions of the generically human, of what isthe legitimate end of life, does not differ incalculably from man to man that menare able to live in communities and to hold common interests.69

Thus, Veblen suggested that, by describing business enterprise as wasteful,the social scientist was not making a private moral judgment of his ownbut was reporting the moral consensus of the human community. This ar-gument is somewhat incoherent. Obviously, the “brute fact” that peopleuse the word “waste” does not mean that they agree about what is wasteful.Human beings have used words such as “truth,” “beauty,” “justice,” and“virtue” for centuries without ever reaching a consensus about what is true,beautiful, just, or virtuous. By suggesting that a generic concept of wastewas embedded in man’s social consciousness, therefore, Veblen seemed tomirror the mistake of conventional economists whose hedonistic calculussuggested that the values of business enterprise were embedded in the in-dividual mind. In both cases, the suggestion that the “legitimate ends oflife” can be discovered through an impersonal scientific analysis of factsignores the political and literary dialogue whereby human communities at-tempt to forge a moral consensus.

Veblen seemed to believe that, once the illusions of ownership weredispelled, workers would have little problem deciding what to do with theirlabor. This idea does not seem to be tenable in the era of modern industryand mass production. In the era of savagery, when a community could dolittle more than provide for its material subsistence, men may have had arough consensus about the “legitimate” ends of industry. Today, however,when we can produce much more than we require for our basic physicalsubsistence, such a consensus has become more difficult to achieve. In or-der to develop a compelling alternative to the values of business enterprise,industrial workers need more than an impersonal analysis of the competi-tive aims of businessmen. They also need a powerful alternative vision of“the legitimate ends of human life.” Veblen’s scientific analysis may clearthe ground on which these alternative values can be constructed by de-stroying the notion that business values are inevitable and natural. Yet, be-

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The Metaphysics of Business

cause science and industry focus on means rather than ends, they are notcapable of revealing the “legitimate ends of human life” all by themselves.

ENDNOTES

1. Thorstein Veblen, The Theory of the Leisure Class (New York, 1899), pp. 98-99.2. Casual readers and critics of Veblen are not the only people who dismiss his claims of

moral neutrality. See, for example, Rick Tilman, the most prolific student/admirer ofVeblen writing today. In a recent essay on Veblen, Tilman argued that: “Veblen’s theoryof institutional change had a potent normative component. . . . Conventional economicshas been heavily influenced by the radical ethical relativism and moral agnosticisminherent in neoclassical economics. The Veblenian position thus provides a clearalternative, with its normladen focus on the desirability of particular values.” See “SomeRecent Interpretations of Thorstein Veblen’s Theory of Institutional Change,” inThorstein Veblen: Critical Assessments II, John Cunningham Wood ed., (New York, 1993),pp. 455-56. I think that there is some truth in the idea that Veblen’s theory had a“normative component” but Veblen never would have described his theory in this way.He constantly attacked the tendency of other economists to “normalize” their theories,and he would have been horrified by the idea that his own theory was “normladen.” Ialso want to argue in the course of this essay that he did not see conventional neoclassicaleconomists as “moral relativists” or “moral agnostics.” What bothered Veblen aboutneoclassical economics were the pervasive moral assumptions that undermined its claimsof objectivity.

3. See Joseph Dorfman in Thorstein Veblen and His America, (New York: 1934). Veblenconsidered “The Place of Science in Modem Civilization” his best essay. See Dorfman, p.260. The essay became the title work of the most important collection of Veblen’s essays.Dorfman also discussed how Veblen’s emphasis on moral neutrality confused his classesas well as his readers: “Of Veblen’s own opinions on prevailing questions no one wascertain . . . . A student in the course in trusts would ask what could be done about thesituation he described. Veblen’s eyes would sparkle, the lines of his face would be drawninto a quizzical smile, and he would answer, in effect: ”Mr.– –is not satisfied with thephilosopher’s statement, ‘I want to know.’ Mr.– –wants to do something about it.’ Theclass would laugh and Veblen would say no more, but often he would tell his students:‘We are interested in what is, not what ought to be.’” pp. 246-247.

4. See Thorstein Veblen, “Mr. Cummings’s Strictures on The Theory of the Leisure Class”in Essays in Our Changing Order, Leon Ardzrooni ed., (New York: 1934), pp. 16-31.Especially see pp. 18-19 where Veblen defended his definition of “waste.”

5. On this confusion about Veblen’s meaning, also see Tilman. In The Intellectual Legacyof Thorstein Veblen: Unresolved Issues, (Greenwood Press: Westport, Connecticut, 1996),Tilman notes that “there is no consensus among Veblen scholars left, right or center, bethey social scientists, humanists or otherwise, regarding the central meaning of his work.”p. Xi.

6. John Bates Clark, The Distribution of Wealth, (New York: 1899), p. v. Clark taught Veblenat Carleton College in Minnesota during the 1880s. Clark was a founding member of theAmerican Economic Association. Today the most prestigious award that an Americaneconomist can win is the John Bates Clark Award.

7. In my dissertation, “Transcendental Economics: The Quest to Harmonize Economic andMoral Law in Nineteenth-Century American Thought,” I study this tradition of Americaneconomic thought in detail by looking at the work of Henry C. Carey, Henry George,and John Bates Clark. I argue that Ralph Waldo Emerson, who was a friend of Carey’s,helped to legitimize this way of thinking about the economy with his transcendentalphilosophy of mind. Emerson argued that the moral laws of the human mind wereembedded in the scientific laws of nature. See, for example, Emerson’s “Compensation,”

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in which he says “Thus is the universe alive. All things are moral.” The Selected Writingsof Ralph Waldo Emerson, Brooks Atkinson ed., (New York: 1940), p. 175. Veblen’sphilosophy of nature was essentially the opposite of Emerson’s. Veblen might say, “Theuniverse is not alive. No thing is moral.”

8. Notice the similarity between the categorical distinctions in Veblen’s thought, and theepistemological categories of Immanuel Kant. According to Kant, the human mind, inthe noumenal realm, was “spiritual,” and “teleological” whereas the phenomenal realmof natural science was materialistic and pre-determined. Veblen wrote his doctoraldissertation on Kant, and I think that Kant’s philosophy continued to influence Veblenin more profound ways than most scholars have recognized. One could even argue thatVeblen’s attack against capitalism was based on his belief that it violated Kant’scategorical imperative by treating human beings as means—or as phenomenologicalobjects—rather than as ends. Although Veblen’s dissertation has been lost, he publishedan interesting essay on “Kant’s Critique of Judgment” in 1884. This can be found in Essaysin Our Changing Order, 175-193.

9. Thorstein Veblen, “Why is Economics Not an Evolutionary Science,” The Place of Sciencein Modem Civilization and Other Essays, (New York: 1919), pp. 59-60.

10. Thorstein Veblen, “The Evolution of the Scientific Point of View,” The Place of Sciencein Modem Civilization and Other Essays, p. 41.

11. Ibid., p. 41.12. Thorstein Veblen, “Why is Economics Not an Evolutionary Science,” The Place of Science

in Modem Civilization and Other Essays, p. 63.13. Ibid., 61.14. Thorstein Veblen, The Higher Learning in America, (New York: 1918), p. 9.15. Thorstein Veblen, “The Economics of Karl Marx: II” in The Place of Science in Modem

Civilization and Other Essays p. 436.16. Thorstein Veblen, “Why is Economics Not an Evolutionary Science?” in The Place of

Science in Modem Civilization, p. 65.17. Ibid., p. 66.18. It would take us away from the main argument of the essay to explore the interesting

relationship between Marx and Veblen. Veblen considered Marx a Romantic, like theclassical economists, because he believed that Marx assumed that some sort of non-humanspiritual force was directing history to a specific human end, a socialist society. On amore subtle level, Veblen also believed that Marx’s discussion of class interests wasteleological. To talk about the interests—as opposed to the tendencies—of a class is toimpute teleological consistency to it according to Veblen. Whereas Smith had seen asingle spiritual agent governing the capitalist economy toward a harmonious end, Veblenthought that Marx saw two spiritual agents fighting out an inevitable battle. See Veblen’sdiscussion of Marx in “The Socialist Economics of Karl Marx and His Followers,” ThePlace of Science in Modem Civilization, pp. 409-456.

19. Ibid., p. 151. For a discussion of the psychologists who may have influenced Veblen, seeTilman, “Veblen’s Psychology and Its Doctrinal Roots,” in The Intellectual Legacy ofThorstein Veblen, pp. 47-72.

20. Thorstein Veblen, The Theory of the Leisure Class, p 15. (my emphasis).21. See Veblen’s analysis of “The Limitations of Marginal Utility,” in The Place of Science

in Modem Civilization: “Both the classical school in general and its specialized variant,marginal-utility school, in particular, take as their common point of departure thetraditional psychology of the early nineteenth-century hedonists, which is accepted as amatter of course or of common notoriety and is held quite uncritically.” p. 234.

22. Thorstein Veblen, “Why is Economics Not an Evolutionary Science?” in The Place ofScience in Modem Civilization, pp. 73-74.

23. Quoted by Joseph Dorfman in Thorstein Veblen and His America, (New York: 1934) p.130-31.

24. Thorstein Veblen, “Why is Economics Not an Evolutionary Science?,” The Place ofScience in Modem Civilization, p. 74.

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25. Thorstein Veblen, “The Limitations of Marginal Utility,” The Place of Science in ModemCivilization, p. 249.

26. Thorstein Veblen, “The Preconceptions of Economic Science III,” The Place of Sciencein Modem Civilization and Other Essays, p. 157.

27. Thorstein Veblen, The Theory of the Leisure Class, p. 219.28. Ibid., p. 220.29. Thorstein Veblen, The Instinct of Workmanship, (New York: 1914), p. 158.30. Thorstein Veblen, The Theory of the Leisure Class, pp. 12-13.31. Ibid., p. 17.32. Ibid., p. 103.33. Thorstein Veblen, “The Place of Science in Modern Civilization,” The Place of Science

in Modem Civilization, p. 12.34. Ibid., p. 22.35. Veblen studied with Sumner while he was at Yale and always claimed to admire him.

According to Dorfman, “Sumner seems to have been the only man for whom (Veblen)expressed, in conversation, a deep and unqualified admiration.” Thorstein Veblen and HisAmerica, p. 311. Dorfman also notes that Veblen was a close student of Spencer. For adiscussion of some of the ways that Spencer may have influenced Veblen, see E. AntonEff, “History of Thought as Ceremonial Genealogy: The Neglected Influence of HerbertSpencer on Thorstein Veblen,” in Thorstein Veblen: Critical Assessments 1, pp. 413-438.Especially interesting is Eff’s comparison between Spencer’s “Militant/IndustrialDichotomy” and Veblen’s contrast between the predatory and industrial instincts on pp.427-430.

36. Quoted by Dorfman, pp. 175-76.37. Thorstein Veblen, “The Beginnings of Ownership,” Essays in Our Changing Order, (New

York: 1934), p. 42.38. Ibid., p. 47.39. Ibid., p. 47.40. Ibid., p. 48.41. Ibid., p. 48.42. Thorstein Veblen, The Theory of the Leisure Class, pp. 31-32.43. Thorstein Veblen, The Instinct of Workmanship, p. 210.44. Ibid, p. 204.45. Thorstein Veblen, The Theory of Business Enterprise, (New York: 1904), p. 375.46. Thorstein Veblen, Absentee Ownership, (New York: 1923), p. 48.47. Thorstein Veblen, The Instinct of Workmanship.48. Thorstein Veblen, The Instinct of Workmanship, p. 213.49. Thorstein Veblen, “Mr. Cummings’s Strictures on The Theory of the Leisure Class,” in

Essays in Our Changing Order, (New York: 1934), p. 28.50. Thorstein Veblen, Absentee Ownership, p. 319.51. Ibid., pp. 320-21.52. Thorstein Veblen, The Theory of Business Enterprise, pp. 290-91.53. Thorstein Veblen, The Theory of Business Enterprise, p. 310.54. Ibid., p. 16.55. Ibid., p. 266.56. Thorstein Veblen, “Industrial and Pecuniary Employments, ”The Place of Science in

Modem Civilization, p. 311.57. Thorstein Veblen, The Theory of Business Enterprise, p. 213.58. Ibid., p. 237.59. Ibid., p. 200.60. Ibid., p. 201.61. Ibid., pp. 232-233.62. Ibid., p. 238.63. Ibid., p. 232.64. Ibid., p. 238.


65. Although this claim may surprise some readers today, it was a widely shared opinionamongst economists in Veblen’s era. In some works of American history, the “GildedAge,” which preceded the reforms of the Progressive Era, has been described as an eraof great prosperity for business. This was not how most of the businessmen who actuallylived through the Gilded Age experienced it. Simply by noting the existence of a longdepression, Veblen was not being iconoclastic. I discuss this issue in some detail in thefifth chapter of my dissertation, “The Crisis of Transcendental Economics.” Also see,James Livingston, Origins of the Federal Reserves System: Money, Class, and CorporateCapitalism, 1890-1913, (Cornell: 1986). The first chapter discusses this issue. The mostinfluential contemporary account of the depression was David A. Wells, Recent EconomicChanges, (New York: 1889).

66. Thorstein Veblen, The Theory of Business Enterprise, p. 234.67. Ibid., p. 230.68. Thorstein Veblen, “Dementia Praecox,” in Essays in Our Changing Order, p. 430.69. Thorstein Veblen, “Mr. Cummings Strictures on The Theory of the Leisure Class,” in

Essays in Our Changing Order, pp. 18-19.

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The Metaphysics of Business: Thorstein Veblen