Consumption and well-being
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Consumption activities most directly address people’s living standard (or lifestyle) goals. People generally have other goals as well, concerning self-realization through work, fairness, freedom, ecological balance, etc., which may either be supported by, or undermined by, their actions as consumers.
Looking at the contribution of consumption to individual and social well-being requires taking a broader view than that of marketers, who are primarily interested in selling their products. It also means taking a broader view than that taken by utility theorists, who are primarily interested in modeling consumer choice.
Contents
Old Utility Theory, New Utility Theory, and Capabilities
What is the relation, then, of consumption to well-being? Can social well-being be increased by any particular policies or practices related to consumption?
Old Utility Theory. In the old-fashioned utility theory view, individual well-being was, rather narrowly, simply equated with pleasure. Because, however, some of the early theorists thought that utility could be measured and summed not only within a person, but also across persons, the theory was sometimes used to draw conclusions about social well-being.
Some of these economists assumed that everyone has similar utility functions, characterized by diminishing marginal utility. If so, then taking away $1 that a rich person would have spent on a luxury good such as caviar would cause little decrease in utility, since the rich person has already consumed a great deal and has low marginal utility from consumption. Giving that same $1 to a hungry poor person who has high marginal utility to spend on a necessity like bread would cause an increase in overall utility that more than outweighed the loss to the rich person. This is a fancy way of saying that satisfaction of wants, what people simply desire, should take a back seat to satisfaction of needs, what people require for a healthy, flourishing life.
Thus such economists, when comparing two societies with the same overall level of consumption (or income), felt safe in concluding that the society with a more equal distribution would have higher social well-being (that is, a higher sum of utilities) than the less equal society. This was used to justify redistributive policies and a concern with poverty.
New Utility Theory. The new utility view, well established by the mid-to-late-20th century, shared the same basic normative ideal as the old utility view. Both agreed that the satisfaction of consumer desires was the goal of economic activity.
However, by this time the notion of utility as a measurable entity had been thoroughly dropped, and economists had come to believe that utility could not be compared across individuals. Consumer sovereignty held sway, but now in a very individualistic form. Since people were assumed to act rationally in their own self-interest, their actions were taken to reveal their true preferences, and were assumed therefore to serve their own well-being, however they might individually define it.
These assumptions had two significant implications for discussions of well-being. First, by emphasizing choice and denying interpersonal comparisons, discussion of wealth and poverty faded away. It was argued that distinguishing wants from needs was impossible. How could food be considered a necessity, it was argued, if some people choose to fast (even to death) for religious or political reasons? How could good dental care be “needed” in the U.S. if people in poor countries often survive without it? Since “needs” could not be clearly and rigorously distinguished from “wants,” or necessities from luxuries, discussions of poverty were considered to be less scientific than discussions of rational consumer choice. Issues of minimum necessary consumption levels, basic needs, poverty, and redistribution were rarely discussed in the economics of this period, except by specialists.
The second implication was that any suggestion that consumers were acting unwisely—that consumer behavior perhaps did not serve to advance their standard of living or more general goals—was generally dismissed as “paternalistic.” No one, besides the individual, should be able to say what is good for him or her, the argument went. The choices and preferences of the sovereign consumer were sacred.
If someone ate a high-fat diet and developed heart disease, for example, it might be assumed that the person had calculated that her pleasure from eating the high-fat diet outweighed the drawbacks of ill health. To encourage her to eat a better diet—or to campaign to keep advertisements for junk food out of schools—would be paternalistic interference. Occasionally exceptions to this belief were granted if it could be shown that one of the assumptions of the view had been violated. (Usually this was the assumption that consumers’ choices were informed by “perfect information.” For example, it might be that the consumer was not well-informed about the relation between diet and disease.)
Capabilities. Nobel laureate economist Amartya Sen, in the late 20th century, proposed a different approach. He argued that social evaluations of peoples’ advantage and disadvantage should be done on the basis of “capabilities,” rather than on the satisfaction of their desires. The capability approach evaluates institutions, policies, and actions according to the opportunities they give people for valuable ways of living.
It is widely assumed, for example, that being adequately nourished, being in good health, being well sheltered, and avoiding premature death are good things. People might add to the list more complicated valuable ways of living, including having self-respect, being able to participate in community life, being happy, being able to form intimate relationships, and being able to live in harmony with nature.
The capabilities view allows for more complex goals than either version of the utility theory view. It changes the focus to objective criteria like opportunities for health and participation, and away from subjective feelings of pleasure or satisfaction. It resurrects the concern with poverty and deprivation that was lost in the new utility theory view. However, with its emphasis on opportunities rather than outcomes, it also preserves some of the respect for individual choice characteristic of the new utility view. We don’t worry about people who are hungry because they choose to fast, according to this view, as long as they have the capability of eating well (if they should choose to).
Sen’s capability approach was influential in bringing discussions of well-being back into economics. Instead of looking just at whether people get pleasure from their consumption choices, it directs us to look at whether societies, and societal consumption patterns, would permit people to live healthy lives, in harmony with each other and nature.
Inadequate Consumption: Poverty
The division of the world’s human population into portions defined by their consumption characteristics was pioneered in 1992 by ecologist Alan Durning. He described the high-consuming fifth of the world as those who travel by car and air, eat meat-based diets, live in spacious, single-family residences, and discard much of what they purchase as packaging or post-consumption waste.
The next three-fifths of the global population may look deprived, when compared to the high-consumers—and, to the extent that that is their reference group, they may feel deprived—but they are well-off indeed when compared to any but the richest individuals of 200 years ago. Their ancestors would have envied them their healthy diet (grain- and vegetable-based, with some meat); the convenience of bicycles and public transportation; work that is made productive through the assistance of mechanized tools; light, heat, and running water in homes and workplaces; much improved and convenient sanitation; and a level of schooling that was available to only a very few in, say, the year 1800.
The bottom one-fifth of the global population suffers from absolute deprivation. What constitutes absolute deprivation? If a household is unable to obtain minimal nutrition, shelter, clothing, and sanitation for its members, most people would agree that it is deprived of the necessities of life. Some people would add other services, such as elementary education and basic health care, to the list of necessities. The United Nations defined absolute poverty as subsistence on less than US$1 per day. Worldwide, 1.2 billion people suffer from absolute poverty, and 826 million people suffer from undernourishment.
The poorest of developing countries, particularly in sub-Saharan Africa and south-central Asia, are simply too poor to lift their entire populations out of absolute deprivation. Increasingly, however, the more economically successful developing countries in Asia and Latin America have sufficient resources to provide basic necessities to all; the fact that absolute deprivation still exists for the poor in these countries reflects the inequality in the distribution of income. Absolute deprivation may also vary with factors like race and ethnicity, and even within households by age and gender.
Because inadequate consumption is not simply a matter of having a low household income, however, some kinds of absolute deprivation can exist even amid general wealth. As the capability approach points out, well-being depends on resources relative to needs. Some people—particularly young children and the ill and handicapped—have dependency needs for care, plus needs for special goods and services (like education or medicines) that healthy, prime-age adults do not require. Even people with fairly high household incomes may sometimes, then, find themselves in a situation of lack. Advocates for the elderly, the sick, and children, for example, often claim that the U.S. has an inadequate system of care. A recent nationwide study of child care centers rated only 8% of infant care centers as good to excellent; 40% of infant centers were judged to be so inadequate that children's safety was potentially jeopardized. According to a Consumer Reports study in 1996, about 40 percent of nursing homes repeatedly fail to pass the most basic health and safety inspections. In such situations, people’s basic needs for care and safety are not being met.
Absolute deprivation is only one type of inadequacy, however. As discussed earlier, psychological research also tells us that people’s perception of their own well-being depends on the consumption patterns they see in the people around them—their reference groups. Modern information technology has created a new source of discontent, in that the predominant images shown to all the world are of the affluent one-fifth—or indeed, of even more elite subgroups. The result is the creation of widespread feelings of relative deprivation, i.e., the feeling that one's condition is inadequate because it is inferior to someone else's circumstances. The richest man in a small village could be quite content with traditional clothing and diet, an outdoor latrine, and water drawn from a communal well, as long as that way of life is consistent with honor and self-respect. However, if his reference group changes—for example, if he begins to compare himself with news he hears of life in the city—all that he has will begin to seem poor, mean, and disgraceful.
The government-defined poverty level in the U.S. was $18,100 for a family of four in 2001. This income would be at or above the national average in many countries; in most developing countries a family income of $18,000 would put that family well above the poverty level. It may be possible to buy the bare physical necessities of life for this sum, even in the U.S.—at least in areas of the country with low housing costs.
Yet it is likely that most of the Americans who fell below the poverty level (12.1% in 2002) do not feel able to enjoy a "normal" American lifestyle. They clearly do not have the resources to buy the kinds of homes, cars, clothes, and other consumer goods transportation and wait in long lines for health care. People with sufficient physical means of survival may still feel ashamed, belittled, and socially unacceptable if they have much less than everyone around them. It is unlikely that the 16.7% of U.S. children who live in poverty start out on an “even playing field” with non-poor children, in terms of nutrition, health care, and other requirements.
The fact that people deprived of “normal” societal consumption levels feel relative deprivation suggests that poverty, even relative poverty, is not conducive to promoting capability goals such as self-respect and the ability to participate in community life.
Would it be good, then, for everyone to aspire to the “normal” level of consumption enjoyed by middle-income (or upper-income) Americans? This question brings us back to the issues of capabilities, from another angle. When does consumption serve to provide people with healthier, more fulfilled lives? Are there times when it does not?
Excessive and Misdirected Consumption: “Affluenza”?
Increasing consumption is unquestionably a goal of high importance in situations where people have insufficient goods and services. However, as the human race grows richer, it becomes increasingly important to recognize that more consumption is not always better. Increasing consumption can be worse for individuals who may suffer ill health from overeating, psychological disturbances from certain kinds of overstimulation, and (some say) spiritual malaise from exclusive or excessive attention to material things. In short, there can be such a thing as too much consumption.
At some point, the drive for pleasure can begin to cut into other goals, and even basic valuable capabilities like good health. For example, diets high in sugars and fats can lead to people becoming overweight. Obesity, in turn, is a risk factor for all four leading causes of death in the industrialized world—stroke, heart disease, cancer, and diabetes. In the U.S. about 300,000 people a year die from health problems related to obesity. Obesity is a growing problem among the more affluent classes in less developed countries as well, even as too few calories remains a serious problem for the very poor.
As described earlier, psychological research indicates that people’s feelings of well-being adapt over time to their situation (or reference point). To the extent that a society emphasizes the consumption of material goods, this means that subjective feelings of happiness and satisfaction can be maintained only by continually ratcheting up the pleasures to be had by consuming them.
A long line of distinguished economists has pointed out this ratcheting-up effect, and the great degree to which consumption in affluent societies tends to be less about staying alive and healthy than about achieving status or “keeping up with the Joneses.” Thorstein Veblen (1857–1929) wrote about “conspicuous consumption.” John Kenneth Galbraith’s The Affluent Society (1958), Tibor Scitovsky’s The Joyless Economy (1976), Juliet Schor’s The Overspent American (1998), and Robert Frank’s Luxury Fever (1999), took up this theme. A recent special on public television focused on the “disease” of “affluenza.” The use of reference groups creates a paradox in consumption: we can apparently never have enough to be satisfied, because there is always (unless we are Bill Gates) someone with more than we have.
Does more consumption make people happier? In surveys of people at any point in time, people with more to spend generally report themselves as somewhat more satisfied with their lives than do people with less to spend. This makes sense, given both the stresses of being poor and the way people lower down will tend to compare themselves, negatively, with people higher up. Factors not as related to consumption, however, like good health and good relationships, often contribute even more strongly to people’s self-reported sense of satisfaction.
Over time, however, more consumption does not seem to be related to more happiness in affluent societies. In 1957, for example, 35 percent of respondents to a U.S. survey indicated that they were “very happy.” Between 1957 and 1998 the purchasing power of the average citizen of the U.S. roughly doubled. In 1998, the proportion saying they were “very happy” was a little lower, at 32 percent.
Even people with abundant purchasing power seem to find their situation only “normal,” or even lacking, once they have gotten used to it. Juliet Schor reports that in a 1995 survey, over a third of respondents in households with income between $75,000 and $100,000 agreed with the statements “I cannot afford to buy everything I really need,” and “I spend nearly all of my money on the basic necessities of life.” Even 27% of those with incomes above $100,000 agreed that they “cannot afford to buy everything I really need.”
The situation of rising consumption levels has been compared to one in which the front row of a crowd of spectators stands on tiptoe to see better. Everyone else has to stand on tiptoe also, just to see as well as before. All are more uncomfortable, but none except the front row are better off. There is probably no net gain.
The Ecological Impact of Consumption
More consumption of goods that use up resources in their production and generate waste materials also means more degradation of the natural environment. A U.S. standard of living for everyone on the globe is simply impossible. Analysts have estimated that giving everyone in the world a U.S. style of diet and other consumption would require an extra two to four planets to supply resources and absorb waste.
High-consuming countries have an impact on the natural environment that is out of proportion to their populations. For example, the average American consumes 269 pounds of meat a year. Per capita meat consumption in industrialized countries is about three times that in the developing world.
While some livestock are fed from land unsuitable for crops, livestock currently also consume about 37% of the world’s grain harvest. Since livestock are relatively inefficient converters of the calories in grain to calories for human consumption, high-meat diets mean less food available for direct human consumption. Growing pressure on the world’s available cropland, along with environmental damage from fertilizer run-off, pesticides, depletion of aquifers, and soil salinization make U.S.-style diets an unsustainable proposition.
There is about 1 passenger car for every 2 people in the U.S., 1 for about every 3.5 people in Europe, and 1 for every 68 people in developing countries. Carbon dioxide emissions arising from the burning of fossil fuels (such as gasoline in cars) have been scientifically linked to problems of global warming. According to United Nations figures, for example, North America has about 5% of the worlds population, as shown in Figure 1. However, as illustrated in Figure 2, North America generates over one-quarter of the world’s carbon dioxide emissions. While the vast majority of the world’s population lives in countries of the global South, the countries of the global North generate more than half of the emissions linked to global warming.
Increased use of private cars also competes with food production for the use of land, since car travel requires paved roads and parking lots. For example, it has been estimated that if China were to increase its car ownership to the U.S. level (of one for every two people) it would need to pave over an area for parking lots and roads equivalent to more than half of its current rice-producing land!
As public awareness of environmental damage increases, some beneficial changes in consumption patterns have been accomplished. Reduced use of chlorofluorocarbons (CFCs, formerly used in refrigeration and air conditioning) has slowed the depletion of the Earth’s ozone layer, and use of unleaded fuels has reduced the release into the atmosphere of toxic lead. More remains to be done, however, to encourage healthy and sustainable (Sustainomics and sustainable development) patterns of consumption.
Further Reading
- United Nations Population Division, “Population, Environment and Development 2001.”
- Global Development And Environment Institute at Tufts University
