A Critique of Consumerism With An Unusual Flavor

This article (via the NY Fed) provides an analysis of consumerism that contrasts with the more familiar claim that advertising traps us into unsatisfying lifestyles. We are trapped into consumerism instead by the structural factors in the economy.

Economic theory suggests that we make choices as individuals to work more hours or to work fewer hours in order to have more leisure (the famous backward bending labor supply curve). Employers, however, set the number of work hours in a day. They prefer to have fewer employees who work more hours than a larger number who work part time. Therefore, employer decisions cause us to work more hours, and their preferences determines the trade off between work and leisure. Our consumption levels are determined by the hours worked which produce our income. Many families experience a "time squeeze" in which there are not enough hours in the day to perform our jobs and to engage in other activities such as taking care of the family and having more time for leisure.

Society is also blind to the problem of ecological sustainability. We don't price in the cost of capital depletion and pollution when we make production and consumption decisions. Therefore, we consume more than would otherwise consume if we priced in the externalities.

The third structural factor is status competition. We want to display more wealth than our perceived rivals and we want to defend against the perceived wealth of our rivals by matching their consumption. Moreover, we no longer restrict our status competition to our neighbors. Instead we are aware of the lifestyles of the rich and the famous as well. It is not possible to satiate our consumption. It ratchets up as we move from one level to the next step on the ladder. It is difficult to deny status via consumption to ourselves when others refuse to do so. The goal of getting rich and consuming even more has become built into our status competition.

The best way to reduce overconsumption is to build communities which place a higher value on ecological sustainability and refuse to engage in consumption as the means to status. I guess it takes a village. I would add that many occupations create their own villages which demand increasing levels of consumption. Hedge funds have their own system of status competition. The forms of consumption become increasingly sophisticated as one rises up the ladder. The $500 bottle of wine along with the consumption of art and other scarce commodities creates the need to work even more hours in order to match the status of others who participate in that community.