Veblen Good

  

Categories: Ethics/Morals

In the words of Adam Smith, “Man naturally desires, not only to be loved, but to be lovely.” Maybe you feel lovely by volunteering at the dog shelter, or by providing for your family, or by owning a Tesla, or by having the “GUCCI” on your butt (sweatpants, not a tattoo). Hmm...the latter two are pretty conspicuous.

Thorstein Veblen thought so, anyway. He zeroed in on the Tesla and Gucci types of feeling lovely: buying expensive things for status reasons, which he termed as “conspicuous consumption.” Out of this came the idea of a Veblen good: a good whose demand increases as the result of the price increasing, because the price increase makes it more desirable as a status symbol.

For many goods, this is not the case. When prices go up on your coffee, bananas, and gas, you will probably buy less of them...maybe find substitutes for the food-stuffs, and stop taking joy rides, reducing your gas consumption, until prices go down. But if that fancy Rolex increases in price, or that hairless designer cat costs you an arm and a leg (it only cost an arm last year), then the demand for those things goes up. The more expensive (and thus scarce) a luxury good is, the more it’s demanded by the people who can afford it.

A less conventional type of Veblen good? Some colleges. An elite college lowering its tuition might be a sigh of relief to current students, but to the outside world, it may have a cheapening effect. Conversely, if an elite college raised its tuition, people often assume it must be worth the high price tag, making it a school worth going broke to attend.

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Econ: What are Public Goods?3 Views

00:00

And finance Allah shmoop What are public goods order Well

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the public has a lot of things mostly opinions but

00:10

also goods like public goods or goods or services that

00:13

all people of society have access to which are created

00:16

for public benefit rather than profit If you want to

00:19

get all technical about it well public goods are non

00:22

excludable and non rivalrous Well non exclude ability means that

00:28

nobody is excluded Even if someone didn't cough up any

00:31

cash to receive the benefits of that good whether you

00:33

paid your taxes or not you can go to the

00:35

park into the library Didn't pay Doesn't matter We'LL Non

00:39

rival risk means that more and more people can consume

00:42

the good without additional costs and without preventing others from

00:46

consuming the good There Yeah just because your breathing the

00:50

air While that doesn't stop your neighbor from doing so

00:52

you can take your dog on a walk in the

00:54

park which won't stop others from indulging in the parks

00:57

Um you know Park nous well to contrast what's excludable

01:01

and rivalrous I e The opposite of a public good

01:04

Well a private good like How about roller coasters A

01:07

roller coaster is rival risk since there can be only

01:10

so many people on the roller coaster at once if

01:13

the theme park is conforming Teo you know safety regulations

01:16

Anyway The roller coaster is also excludable because well you

01:20

have to pay to get into the theme park to

01:22

ride the roller coaster because well theme parks care about

01:25

profit Roller coasters are definitely private goods Will public good

01:29

sound pretty great right There's something you topic about them

01:33

Everyone can use them at the same time and without

01:35

paying a cent But they have their fair share of

01:38

problems just like private goods The biggest issue is the

01:40

free rider problem which is well when people take advantage

01:44

of public goods by not paying their fair share of

01:46

the good For instance if you've ever watched a firework

01:49

show from afar for free when it cost money to

01:51

get closer well then you're a free rider You benefited

01:55

from the fireworks show but you didn't pay for it

01:57

and you couldn't be excluded from watch Sing it since

02:00

it's like you know in the sky well when people

02:03

get the benefits without having to pay for the costs

02:05

of that benefit Many goods and services that people would

02:08

otherwise be willing to pay for will disappear or never

02:11

make it to the market at all Take our fireworks

02:13

Example If everybody decided to free ride and watch the

02:16

fireworks show from a bit farther away for free and

02:19

nobody bought tickets to that firework show well then they're

02:22

probably not going to be one next year The moral

02:24

of the story while too much free riding kills firework

02:28

shows and you know other goods which is why exclude

02:31

ability and property lines are so important at least important

02:34

to respect A theme park wouldn't last long if there

02:37

wasn't a wall surrounding it and you could just walk

02:40

in and ride the roller coasters for free The free

02:42

rider problem goes hand in hand with positive externalities like

02:46

positive externalities air benefits somebody gets without paying for them

02:50

and without necessarily even asking for them For instance if

02:54

you love firework shows and happen to have a great

02:56

view of firework show from your backyard while you just

02:58

got a positive externality the fireworks show producer can't charge

03:02

you for viewing the show from your own backyard Maybe

03:05

there would be more firework shows if they could make

03:08

them mohr excludable reducing the positive vibes or positive externalities

03:13

that they're given out for free right So what makes

03:15

our public goods like parks and libraries work well The

03:19

free rider problem is avoided because those goods are typically

03:21

paid for by the government which means it's funded by

03:23

taxes And who pays taxes You D'Oh The public does

03:27

anyway the people who work which means free riding isn't

03:30

a problem because most people are already paying for the

03:33

parks and libraries Oh whether they like it or not

03:35

People who aren't paying taxes are free riding when they

03:39

hang out in the park in the library But because

03:41

the numbers of free riders air so few well it

03:43

doesn't really affect the funding of those goods And at

03:46

least as a present it's not problematic enough to make

03:49

libraries and parks shut down But we'LL see what the

03:52

future holds here What else are you free riding If

03:54

you're not paying your fair share of taxes while things

03:57

that everyone in the country benefits from like national defense

04:00

it's an access to clean air and water Public radio

04:04

Yeah that's a freebie to All right Well free riding

04:07

That isn't Okay Well the free riding Nicolas Cage does 00:04:10.095 --> [endTime] in Ghost Rider Yeah So not Okay Hi

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