Consumerism
Consumerism – How Spending Affects Happiness and Vice Versa
Ann Martin, in her article “Makers, Buyers, and Users: Consumerism as a Material Cultural Framework” defines consumerism as “Consumerism is the cultural relationship between humans and consumer goods and services, including behaviors, institutions, and ideas.”
Consumption, consumerism, and materialism are all relevant in that they concern the interaction of people, which plays a vital role in happiness research. Whereas consumerism is the cultural aspect of consumption, materialism is just the value system one assigns to given goods.
Outline of the past two decades
Shopping and consumption has become a popular trend as the birth of a mall gives people places to not only shop but to eat, visit friends, and hang out. In fact, as the 1980s closed, Martin notes that malls rank third to the home and the office as the location where Americans spent the most time. We now live in an era where the consumption reigns supreme. It’s such a given that we assume in Macroeconomics that C = A + MPC x YD where C = Consumption, A = is the autonomous consumption (consumption that would happen no matter what), MPC is the Marginal Propensity to Consume, and YD is disposable income. We have an equation that assumes people are going to consume when their income is increased, and one of the most fundamental elements of economics is measuring consumption and consumerism. This is vitally important, because as technology has increased, more resources are recovered to provide better goods at a high quantity and a quicker rate than ever before. Consumption has become a way of life, and a fundamental aspect of our culture.
Now, let’s analyze what relation, if any, consumption has with happiness by looking at several key aspects of happiness research.
Adam Smith’s Invisible Hand
The Invisible Hand is crucial for understanding consumerism. This law, which dictates that an economy works best when everyone operates out of their self-interest, provides that people also know the best route to achieve their own happiness. It so follows that disposable income tends to be spent on things that bring happiness, whether they be entertainment and recreationally oriented or simple things as a nicer bed or dining room chairs. Because people assign different values to different things (though generally some things can be seen as having a greater or lesser sum value – for instance the new iPhone versus canned tuna) through materialism, this is a viable explanation for how people act in a free market economy, by both spending based on what they can afford and seeking the best value, and also providing products and services that will provide the best return value.
Habituation and Rivalry
Economist Richard Layard, of the London School for Economics notes that by and large, happiness is not derived from income or material possessions, but by phenomena called habituation and rivalry.
- Habituation
Habituation dictates that happiness can die away after awhile. For instance, upon the purchase of a Playstation 3, a child may feel much more happiness than normal, but that feeling gradually dies away. While the child may always feel happiness from playing, hour 500 provides considerably less happiness than hour 1. In much the same way, a shopper from 1900 might enter a mall and faint from happiness, whereas a modern person thinks nothing of the massive amount of amenities available for purchase.
In short, habituation shows that people become accustomed to certain things. Happiness diminishes because of this accustomization.
- Rivalry
Rivalry dictates that people are only truly happy if they are equal or higher than other people. Richard Layard cites a Harvard study.
From this we can conclude what leads to a lot of purchases. One may be more inclined to purchase a new state-of-the-art laptop for its features, but another plausible possibility is simply to have a better computer than all of one’s colleagues. Happiness is not only derived before habituation sets in, but also with rivalry. This can be concluded because Figure 3 proves that people still want leisure time, even if everyone else gets more, its only money and the status that it brings that causes worry among colleagues.
Conclusion: From habituation and rivalry, we can now extrapolate the effects to consumer spending and happiness. The standard GDP function (Y = C + I + G + X – M), as well as the consumption function (C= A + MPC x YD) dictate that when income increases, so does spending, which helps the economy. Spending goes up for a number of reasons, the ability to have more things to make one happy, satisfies happiness, while other perhaps value possessions as a means of status, contributing to rivalry. From this, we can conlude that both habituation and rivalry have a positive effect on spending, and drive the Aggregate Demand Curve left.
Children
Children exacerbate any problem arising from spending and happiness due to the fact that, at their young stage, they are more impressionable than adults. Habituation and rivalry hit them much harder, as can be witnessed in any mall’s toy store, or lack of play from any home’s Nintendo 64. One important fact is that children are much more susceptible to others’ opinions of what should be. In fact, George P. Moschis and Gilbert A. Churchill, Jr. found in their article “Consumer Socialization: A Theoretical and Empirical Analysis” that peers, followed by family and then mass media and finally school were the most important guides for adolescent consumer behavior, after analyzing 806 adolescents in urban, suburban, semirural and rural areas in Wisconsin.
To combat this problem, countries such as Norway and Sweden have even prohibited commercials targeted at children younger than 12 years old, in order to prevent adolescents from desiring to many material goods. Further this allows family and school to have a greater effect on children rather than mass media geared toward their consumption.
Consumer Socialization
Consumer Socialization is the process by which individuals acclimate themselves to become consumers in the economic sense – they learn more about purchasing, spending money wisely (and perhaps responsibly), and so forth. As a result, the consumer engages learns to both engage in consumption in an economic sense, while learning the societal goings-on of shopping and consuming in a cultural sense. The previously cited article explains that children receive a long “education in shopping and consumption”. This leads us to agree that consumption is a vital characteristic of the world we live in, and that learning how to bargain shop, where the sales are, and what styles fit one’s personality is as vital a way of life as going to school or work.
Conclusion
In summation, spending definitely has an effect on happiness, and vice versa. While Layard believes that the jury is out as to what effect, if it is at all good, most economists agree that happiness is obtained in an consumerist sense not only from material goods but also from status derived from income and the same material possessions. This is because of two phenomena: habituation (the tendency to get less and less happiness from the same object or circumstance) and rivalry (the tendency to be more happy with status than just well-being alone). This problem can be exacerbated in children. Finally, to prove that spending is a way of live that achieves what we desire, and hence happiness, consumer socialization, the phenomenon in which a child's gradual acclimation to adulthood means not only learning in schools, but also in means of consumption, purchasing, materialism and consumerism, has been an observance of recent trends.
Works Cited
Layard, Richard. "Lionel Robbins Memorial Lectures 2002/3: Happiness, Has Social Science Got a Clue?" Delivered on 3, 4, 5 March 2003. London School of Economics
Martin, Ann S. "Makers, Buyers, and Users: Consumerism as a Material Cultural Framework." Winterthur Portfolio, Vol. 28, No. 2/3. (Summer - Autumn, 1993), pp. 141-157.
George P. Moschis; Gilbert A. Churchill, Jr. "Consumer Socialization: A Theoretical and Empirical Analysis." Journal of Marketing Research, Vol. 15, No. 4. (Nov., 1978), pp. 599-609.
