This paper is about the economics of fashion. I argue that the liquidationist thesis on the structural-cleansing nature of recessions (e.g. Schumpeter 1934a, Robbins 1934, Cooper & Haltiwanger 1990, Caballero & Hammour 1994) has an important and much neglected analogue in consumer theory in the idea of periodic liquidation of a lifestyle. The concept of a lifestyle was first defined by Earl (1986) as a complementary set of durable and semi-durable goods that work together as a system to solve consumer problems. A lifestyle in consumer theory is the analogue of an organization in producer theory. One is a system that produces utility, the other a system that produces profit. Firms are affected by technological change and lifestyles are affected by fashion change. I argue that fashion is an emergent consequence of status-seeking competition played out over an environment in which the choice of durable goods (as inputs into a lifestyle) is constantly changing (Veblen 1899, Earl and Potts 2002). My starting axiom is that market capitalism as an evolutionary system in which Schumpeterian competition between firms leads to the continual introduction of novelty (Nelson & Winter 1982, Metcalfe 1998, Loasby 1999, Potts 2000). A major implication of this view is that new rules, or knowledge, enter into an economic system as a three-phase trajectory of origination, adaptation and retention (Dosi 1982, Dopfer 1991). In this paper, I interpret fashion (Bianchi 1998) as the consumer side of these trajectories (Aoki 2002, Foster & Metcalfe 2002) with the observation that they operate over the organization of consumer lifestyles (Earl 1986). My theory is that as business cycles induce periodic liquidation of industrial structure to facilitate growth, so fashion cycles induce periodic liquidation of consumer lifestyles to facilitate growth. I then argue that fashion cycles and business cycles should be theoretically related. This has consequences for economic welfare.