Conspicuous Waste and Representativeness Heuristic

Abstract

The article deals with the similarities between conspicuous waste and representativeness heuristic. The conspicuous waste is analyzed according to the classic Veblen’ interpretation as a strategy to increase social status through conspicuous consumption and conspicuous leisure. In “The Theory of the Leisure Class” Veblen introduced two different types of utility – conspicuous and functional. The article focuses on the possible benefits of the analysis of conspicuous utility not only in terms of institutional economic theory, but also in terms of behavioral economics. To this end, the representativeness heuristics is considered, on the one hand, as a way to optimize the decision-making process, which allows to examine it in comparison with procedural rationality by Simon. On the other hand, it is also analyzed as cognitive bias within the Kahneman and Twersky’ approach. The article provides the analysis of the patterns in the deviations from the rational behavior strategy that could be observed in case of conspicuous waste both in modern market economies in the form of conspicuous consumption and in archaic economies in the form of gift-exchange. The article also focuses on the marketing strategies for luxury consumption’ advertisement. It highlights the impact of the symbolic capital (in Bourdieu’ interpretation) on the social and symbolic payments that actors get from the act of conspicuous waste. This allows to perform a analysis of conspicuous consumption both as a rational way to get the particular kind of payments, and, at the same time, as a form of institutionalized cognitive bias.

Keywords

• conspicuous consumption
• behavioral economics
• bounded rationality
• American Institutionalism