Well&Being and Affl Uence in the Presence of a Veblen Good1
Well-Being and A• uence in the Presence of a Veblen Good1 October 2005 B. Curtis Eaton, The University of Calgary Mukesh Eswaran, The University of British Columbia Abstract We develop a series of simple, general equilibrium models that incorporate a pure Veblen good. We examine the comparative statics of well-being, and the consumption of leisure, the Veblen good, a standard consumption good, a standard public good, and a good that we call community, with respect to exogenous increases in productivity. In all of our models, as productivity increases, the Veblen good eventually comes to dominate the economy in the sense that, by reducing leisure, more than all of any added productivity is dissipated in the production of the Veblen good. In fact, except for some knife edge cases, the Veblen good eventually crowds out all other economic activity. In particular, our …ndings show that, in the presence of a Veblen good, productivity increases contribute to the destruction of social capital. Key Words: conspicuous consumption, Veblen, well-being, leisure, social capital JEL Classi…cation Numbers: D62, H23, J22, Z13 1 We wish to thank Jay Allen, Jeremy Clark, Brian Copeland, Herb Emery, John Helliwell, Ken McKenzie, Rob Oxoby, Scott Taylor, Duane Rockerbie, and the students and faculty who participated in the workshop on Well-Being at the University of Calgary in the winter term of 2005. We would also like to thank participants of the DIET Workshop at the University of British Columbia and of the Bank of Montreal Lecture Series on Economics and Evolution at Simon Fraser University.
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