Lifestyle Conformity and Lifecycle Saving : A Veblenian Perspective

Since the 1950s, the lifecycle hypothesis has been the dominant explanation for the ‘inverse U’ in household wealth accumulation. This paper advances an alternative explanation, rooted in the ideas of Veblen, that emphasises the role of lifestyle conformity: Because people tend to adopt lifestyles common to their social group and modify them in standard ways as they age, lifecycle norms impart a certain order to the accumulation of assets and liabilities, which enables people to ‘do’ lifecycle saving via habitual thinking. After laying out the argument conceptually, the paper provides empirical evidence on the role of conformity in lifecycle saving and discusses its contribution to the current low saving rate in the USA