The troubled economics of anti-consumerism

Anti-consumerism as a gut-feeling has been around for ages. But the attempt to rationalise the sentiment in economic terms is a product of our times. And a successful one, at that. With titles like The spirit level, Affluenza, All consuming, The selfish capitalist, Prosperity without growth, Britain on the couch, Consumed and many more, anti-consumerist literature has become a thriving consumer good market.

Here’s anti-consumerist economics in one lesson: Suppose two individuals, X and Y, attain a monthly consumption level of 100 gold coins each, and are perfectly happy with it. Now X decides to increase his weekly workload slightly, in order to increase his consumption relative to Y. He generates 5 additional gold coins, and spends them on a good which has no practical use whatsoever; it merely serves as a marker of social status vis-à-vis Y.

Y is now under zugzwang. He decides to reduce his annual holidays in order to increase his consumption to 110 gold coins. Y does not derive any pleasure from the additional goods he buys either. They merely serve to demonstrate his ability to keep up with X.

The retaliation of X is not long in the coming, and so the arms race begins.  There is no way out, because given each individual’s preference for a high status relative to the other, both behave rationally from an individual perspective.

A narrow-minded old-school economist would say: “Great, GDP is increasing, economic growth is high. Everything is getting better.” An enlightened anti-consumerist economist would counter: “Look closer. Both X and Y are now with stomach ulcers from overwork, on antidepressants, their family lives are brittle, and their social lives are in shatters. They are richer – but only in useless status symbols.” In the words of the Spirit Level authors:

“If an important part of consumerism is driven by emulation, status competition, or simply having to run to keep up with everyone else, and is basically about social appearances and position, this would explain why we continue to pursue economic growth despite its apparent lack of benefits. If everyone wants more money because it improves self-image and status in relation to others, then each person’s desire to be richer does not add up to a societal desire for economic growth” (pp. 224-5).

But there is a daring logical step: From the mere fact that so-called ‘conspicuous consumption’ exists, anti-consumerists conclude that apart from bread, butter and a dry bedsit, virtually all consumption serves no other purpose than status-signalling. This is like jumping from the observation ‘There are black-haired people in Finland’ to the conclusion ‘Almost all Finns are black-haired’.

A superficial glance at a large-scale expenditure survey is enough to cast doubt on the anti-consumerist premise. Yes, the average British consumer spends £110 per year on jewellery, clocks and watches; and £290 on hairdressing, beauty treatment and cosmetics. But he/she also spends £135 on milk, £450 on public transport services (excluding air travel), and £760 on insurance products. In total, most of us spend by far the largest part of our budgets on things that are barely observable to others.

Besides, economies where absolute levels of wealth stabilised after having reached a certain level of development have already existed. This describes, more or less, the situation of Argentina between the early 1930s and the early 1990s. According to the logic of the anti-consumerists, Argentineans should have lost interest in material wealth, and fully dedicated themselves to family life and civic engagement instead. A visit to a shopping mall in Buenos Aires suggests otherwise.

Dr Kristian Niemietz is the IEA's Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).

2 thoughts on “The troubled economics of anti-consumerism”

  1. Posted 06/04/2016 at 16:41 | Permalink

    This is flawed in so many ways.

  2. Posted 07/04/2016 at 10:02 | Permalink

    Go on then.

Comments are closed.