J.A. Hobson’s influence on Veblen’s Macroeconomics
1. Introduces the concept of “waste” or “unproductive
consumption” in Physiology of Industry (1889)
2. In Hobson “waste” is a remedy for underconsumption, however
in Veblen’s analysis, “waste” maintains prices by reducing
3. Examples of waste from Hobson roughly corresponds with
Examples of Waste: Hobson and Veblen
Hobson’s examples of “waste”
• The capital engaged in
• Unemployed capital
• Military expenditures
Veblen’s Examples of “waste”
• Competitive consumption
• Excessive competition
• War, colonization, provincial
investments and the like
• Expenditures that merely
withdraw and dissipate
wealth and work from the
Tugan-Baranovsky and Veblen
1. Veblen cites and comments on Tugan demonstrating that capital
investment is the driver of business cycles.
2. According to Tugan, supply therefore is ahead of demand and
creates the need for advertising and marketing, which play large roles
in Veblen’s analysis.
3. Tugan demonstrates how price deflation moves from commodity
to commodity with money being the mediator. In Veblen price
deflation moves from industry to industry with some industries
staying relatively isolated from deflationary pressures.
4. In Tugan-Baranovsky, credit exacerbates business cycles. In
Veblen credit and finance play decisive rolls in all aspects of the
Spiethoff and Veblen agree that:
1. Profits are the drivers of business cycles
2. Increasing prices are critical to rising profits
3. Incongruent actual profits and expected profits are
exacerbated by speculation.
4. Spiethoff’s distinction between “acquisitive capital” and
“productive capital” parallels Veblens distinction between
“industrial” and “pecuniary” pursuits.
Notable disagreements between Spiethoff and Veblen:
1. Inequality is not the root causes of crises although it does
exacerbate them. (Both Hobson and Tugan-Baranovsky
maintained that inequality is the root cause of crises)
2. Productivity growth, one its own, does not cause crises.
The depressive influence of productivity growth can be
overcome by the “upward tendencies” of the business cycle.