Thorstein Veblen

Thorstein Veblen was an American economist and sociologist generally credited as the founder of institutional economics. His 1899 book The Theory of the Leisure Class argued that much of the consumption of the wealthy is driven by a desire to display status through what Veblen called conspicuous consumption rather than by any straightforward pursuit of utility, a challenge to the rational maximizing actor assumed by the neoclassical economics of his day. Veblen argued more broadly that economic behavior is shaped by evolving habits, customs and institutions, and that economics should study how these institutions actually form, persist and change over time rather than build abstract equilibrium models around fixed preferences, an approach that set the agenda for the institutional economics tradition that followed him.