Lifestyle conformity and lifecycle saving: a Veblenian perspective

Since the 1950s, the lifecycle hypothesis has been the dominantexplanation for the ‘inverse U’ in household wealthaccumulation. This paper advances an alternative explanation,rooted in the ideas of Veblen, that emphasises the role of lifestyleconformity: Because people tend to adopt lifestyles common totheir social group and modify them in standard ways as theyage, lifecycle norms impart a certain order to the accumulationof assets and liabilities, which enables people to ‘do’lifecycle saving via habitual thinking. After laying out theargument conceptually, the paper provides empirical evidenceon the role of conformity in lifecycle saving and discussesits contribution to the current low saving rate in the USA.