In
Perfect Cities, it talks about how the elite class was in and of the middle class, and yet defined itself through expensive things like high fashion items from Europe or funding an opera. I think this is an important point in American History. Basically, this is to say that there was a class of people that gained utility (or happiness) from spending money. Not even necessarily from the things they spend the money on, but the actual act of spending money gave these people utility and this mentality continues today. While this was happening in Chicago and New York, there was an economist that grew up in Nerstrand, right down the street from Northfield, that was about to change economic thought forever. This man was Thorstein Veblen.
Although he was considered for a position at St. Olaf, his religious views (or lack thereof) prevented this him from being hired. So he settled for Carleton. Then he went to University of Chicago to teach, where he published
Theory of the Leisure Class in 1899
. In this book, Veblen turned the neoclassical economic model upside down. Literally. This guy had upward sloping demand curves. He said that there is a leisure class, would conspicuously consumes goods solely because they are expensive, and that by consuming them they set themselves apart from the lower classes. One of these goods was having leisure time. If you had time to just lay around or travel it meant that you were well off enough to not be constantly working.
But what did this conspicuous consumption do to the demand for expensive, unnecessary goods in the lower classes? It raised the quantity demanded. All the elites were doing it, so it because popular and as a result the working class emulated the upper or leisure class, except the working class didn't have the means to do so, thus keeping them in the working class. I believe that this holds true today, but this shift in American culture happened right around the time we are currently studying. This summer, I worked at a carwash. I was one of the only employees there that was working there seasonally while on break from school. The rest of the guys worked there to provide for themselves and their families. Believe it or not, you don't make a ton of money working at a carwash. However, I also happened to be the only one there without a new smartphone. The owner had an iPhone, the manager had an Android, and the guy in back that vacuums and is essentially illiterate, and the guys out front that dried the cars all had smartphones too. Out of all the people mentioned, maybe the owner would be considered part of Veblen's Leisure class. The rest, mostly recent immigrants, were just emulating. Maybe it's the American way.
(Read about Veblen and Saint Olaf:
here)