One of the enduring enigmas of contemporary economics is the fact that [it ignores] the nature of modern consumption. It has significant literature to determine the fraction of income and wealth consumed... But most of the issues that are addressed in both the disciplinary and interdisciplinary literatures on consumption are absent in economics.
[These include] questions such as what motivates people to consume, the cultural meanings of consumption, how structures of inequality intersect with consumption, how people decide what products to consume, the role of advertising and marketing, impulse purchasing, compulsive purchasing, and so forth. [While] in the early part of the 20th century, economists did spend considerable effort trying to understand household needs and consumption expenditure trends by income class, the economic theories that dominated after the second world war did not accommodate either the applied needs-based work, or the questions about motivation and meaning which currently dominate the literature.
Why this happened is a fascinating question. There were a number of factors. Firstly, economists became convinced that focusing on income was a parsimonious way to study well-being, neglecting the specific uses to which income was put. This agreed with the classical liberal bias against questioning people’s choices. Liberal theory, in both political science and economics, became almost adamant about ignoring the content of consumer choices, defining its project as the expansion of income and the range of choice. This provided an appealing democratic veneer to the theory, but left these perspectives unable to critically analyse consumption, even when choice was obviously not welfare-enhancing.
Secondly, there was the vexing problem of interpersonal influences on consumer preferences. In the standard model, agents’ preferences are independent of the likes and dislikes of others, i.e., preferences are formed and remain asocial. This assumption obviates unwelcome welfare conclusions such as the case where only relative consumption matters and, therefore, increases in consumption have no positive impact on welfare if they are general across the population. Economists remain deeply wedded to the idea that higher consumption yields higher well-being, and formulations which produce different welfare conclusions have had great difficulty gaining influence within the field.
Finally, economics has retained the 19th century bias in which narrowly understood notions of usefulness are the standard of value …Economists tend to focus on [how] goods and services meet practical needs, in contrast to the cultural qualities of goods – their social, symbolic and cultural meanings. For example, a car provides the practical value of transport but is a heavily laden symbolic consumption item...
Economists tend to the functional partly because symbolism necessarily entails that preferences are social, but also because the symbolic aspects of consumption are coded as belonging to a world where economists have not been too comfortable…The men who dominated economics in the post WWII era were far more comfortable with a no-nonsense attitude which emphasized the practical functions of products, a controlled and calculated approach to spending and saving, and a critical attitude toward what were considered frivolous consumption motives such as fashion, status seeking, and pure aesthetics.
1. Which of the following best highlights the predilection of economists in terms of spending? a) They valued economical spending over culture.
b) They attributed the cultural value of a commodity to the asocial nature of making a choice.
c) They had a critical attitude towards exorbitant spending of income.
d) They valued calculated spending more than impulse purchasing.
2. The author doesn’t rue the absence of the discussion on which of the following issues about consumption in economics? a) What drives people towards purchases?
b) What affects people’s consumption habits?
c) How does inequality adversely influence consumption behaviours?
d) What is the cultural significance of various products of consumption?
3. The ‘19th century bias’ of economists mentioned in the penultimate para of the passage is thata) economists overvalued the practicality of various goods and services.
b) economists underestimated the influence of social and cultural preferences on the valuation of a product.
c) economists focused more on symbolism than on pragmatic value.
d) economists were too myopic about which goods have value and which goods don’t.
4. The ‘vexing problem of interpersonal influences on consumer preferences’ undermines the conclusion that a) consumer preferences are formed and remain social.
b) relative consumption is more crucial than absolute consumption across the population.
c) higher consumption yields higher well-being.
d) increase in consumption doesn’t always have a positive impact on welfare.
5. The author disagrees with the economists of the post-Second World War era on the grounds that: a) greater importance was attributed to the size of the income than the range of choice.
b) the economists didn’t inspect when and why consumer choices didn’t contribute to social welfare schemes.
c) the economists focused on consumers’ expenses rather than on their income. Your answer is incorrect
d) the economic theories were ill-equipped to dissect the nature of consumption.