Know your worth: Julius Caesar and the Veblen Effect

Most of us associate the Veblen Effect with luxury goods such as diamonds, premium alcohol and collectible watches. But as Julius Caesar proved during ransom negotiations with Cilician pirates in 75 BC, the effect is just as potent when applied to people. 

Here’s a little economic refresher before we dig into the history books: a Veblen good is something that people want more of as its price goes up. Named after Thorstein Veblen, a Norwegian-American economist who introduced the idea of “conspicuous consumption” (i.e. showing off wealth to boost social status), these goods behave differently from most things we buy. The law of demand dictates that when prices rise, demand drops. Veblen goods directly contradict this law. Higher prices make them more desirable because they signal status, which is what’s known as the Veblen Effect. On the flip side, if the price drops, these goods lose their luxury appeal and might still be out of reach for the average buyer.

You’ll typically find Veblen goods in the luxury market – think high-end designer brands, luxury cars, yachts, private jets, expensive jewellery, and top-tier fashion. These aren’t exactly the kinds of items you’d pick up at your average store (remember that article about Hermes and the Birkin bag?), and the back-room, preferred-customers-only approach 100% feeds into the appeal. The more expensive and unattainable Veblen goods are made, the more desirable they become – a concept that flies in the face of the ease of accessibility that is required to sell almost everything else. 

Now that we’re all clear on how to spot a Veblen good, see if some of the elements of the following story don’t sound a little familiar.

Julius who?

In the 1st century BCE, the Mediterranean Sea was plagued by pirates – and not the harmless-mischief-Jack-Sparrow sort either. These pirates were a serious problem that particularly affected the region of Cilicia Trachea, or Rough Cilicia, in southern Anatolia. This area soon became notorious for harbouring (wink wink) seafaring bandits who terrorised the Romans and disrupted trade across the sea.

One of the most famous encounters with these pirates occurred in 75 BCE, when a group of Cilician pirates captured a 25-year-old Roman nobleman en route to study oratory at Rhodes. To them, he was just another young lawyer whose family would no doubt pay a handsome ransom for his return. The name Julius Caesar meant nothing to them – nor would it, as the young Julius was decades away from becoming the Dictator Perpetuo who would be recognised and feared across the vast Roman empire. 

According to the historian Plutarch’s writings, this incident was merely a hiccup for Caesar, but turned out to be a catastrophic mistake for the pirates. From the outset, Caesar plainly refused to act like a captive. When the pirates demanded a ransom of 20 talents for his release, Caesar laughed and told them they had grossly underestimated his worth. He suggested they demand 50 talents instead, which they bemusedly agreed to. Caesar then sent his entourage to gather the money while he remained with the pirates, displaying an audacious level of confidence.

You can imagine how baffled these pirates must have been. Who ever heard of a hostage volunteering to increase his own ransom?

If Plutarch’s writings are to be believed, I can imagine that the pirates were soon ready to give him away for 10 talents, nevermind 20. For almost 40 days of his captivity, Caesar treated the situation as if he were an important guest rather than a prisoner. He ordered the pirates around their own ship and demanded silence when he wanted to sleep. He even sat them down to listen to speeches and poems he composed, brazenly berating them as uncultured when they didn’t respond with satisfactory levels of enthusiasm. He participated in the pirates’ games, but always as if he were the leader and they were his subordinates. Occasionally, he would nonchalantly mention that he would have them all crucified upon his release. The pirates found this amusing, assuming it was just a joke from their overconfident, eccentric captive.

But Caesar wasn’t joking. After 38 days the ransom was paid, and Caesar was released. Despite holding no public or military office, he almost immediately managed to gather a naval force in Miletus and set out to hunt down his captors. So sure were they that he was a nobody who couldn’t pose a threat to them, that he found them still camped at the same island where they had held him captive. He then went on to capture them without much resistance. When the governor of Asia hesitated to punish them, Caesar took matters into his own hands. He personally went to the prison where they were being held and ordered them all to be crucified, fulfilling the promise he had made during his captivity.

The art of self-promotion

Are you starting to see how the story of Caesar and the pirates relates to the Veblen Effect? Instead of panicking or trying to bargain his way out of a sticky situation at a lower price, Caesar did the exact opposite – he argued for the ransom to be raised. By doing so, he essentially turned himself into a Veblen good, not only in the eyes of the pirates, but in the consciousness of the broader Roman senate, through which he would later rise to the very top rank. 

We could argue that Caesar’s higher “price tag”, combined with his haughty attitude, made him seem more prestigious and powerful than he really was at that stage, which ultimately led to the pirates treating him with a mix of respect and bemusement. Just as with Veblen goods, where the allure lies in their exclusivity and high price, Caesar used the same principle to his advantage, turning what could have been a humiliating capture into a demonstration of dominance.

Editor’s note: there seem to be a lot of Caesar types on LinkedIn, which is why this ghost actively avoids that platform.

About the author: Dominique Olivier

Dominique Olivier is the founder of human.writer, where she uses her love of storytelling and ideation to help brands solve problems.

She is a weekly columnist in Ghost Mail and collaborates with The Finance Ghost on Ghost Mail Weekender, a Sunday publication designed to help you be more interesting.

Dominique can be reached on LinkedIn here.