I, Consumer

I read an interesting book review in The Guardian website on Consumed: How Markets Corrupt Children, Infantilize Adults and Swallow Citizens Whole by Benjamin Barber. Now, I haven't read the book myself since I haven't had the chance to buy it (can anyone point me to a copy?), but the brief review gave me enough points to ponder.

I won't tackle the book's premise of consumerism being the offshoot of capitalism-- the transition from being a demand-driven economy to being a supply-driven one (i.e., so that "new needs have to be invented") wasn't discussed amply enough for me to comment. It wasn't clear whether advertisers just amplify trivial wants that are already present, or they actually goad consumers into wanting things they didn't want before. Maybe (hopefully) the book tackles this better. However, the review moves on to a more interesting point:

"...Barber moves things on by fingering what he calls the 'infantilising ethos' at the heart of consumerism. The perfect consumer, he says, is like a toddler: unable to defer gratification, lacking empathy, clinging to material objects for security, wanting to be told the same stories over and over again.

xxx

"Consumerism, in Barber's view, exploits the unsophisticated and voracious demands of children and makes adults emulate them. It actively promotes the pursuit of bliss through ignorance. It is fundamentally hostile to history and metaphysics, to anything in fact that might intervene in a citizen's consciousness and make him aware of the difference between what he wants now, as an individual, and what he might want in the long-term, or for society. So, for example, he fancies another cheeseburger, but he would also like a healthy cardiovascular system. He wants an SUV, but he also wants a temperate planet. Consumerism makes it imperative that he choose McDonald's and the Range Rover."

This actually goes to the heart of microeconomic theory: the assumption of stable preferences. Suppose there are three possible options: x, y, and z. A rational individual should have opinions on the three options and be able to order them accordingly, say x > y ~ z or x > y > z (> means "is preferred to" and ~ means "is indifferent to"). Also, if an individual orders the options as x > y and y > z, then this should imply that x > z for him to be rational.

What Barber seems to say is that an individual may have x > y > z, but then advertisers come along and change them to z > x > y, and another one comes along to turn them into y > x > z. Although economic theory already allows for changing tastes, most economic theory still needs the assumption of stable preferences-- calculus would just be impossible without the bedrock of stable preference relations (in other words, the number line). Moreover, Baker says that these changes are not necessarily the outcome of rational thought processes; rather, they are more similar to the "unsophisticated and voracious demands of children", easily swayed with just a little teasing.

This has two important implications. First, in a consumerist world, should all economic theory be modelled to allow changing preferences? Static models can still hold; i.e., there would be no problem if we stick our analysis to an individual's decisions at a single point in time. However, all analysis involving time horizons will have to change-- consumption smoothing decisions on day 1 won't make sense if the individual can't be expected to stick to them on day 2. More importantly, can we even find a way to model and test these changes in preferences? Is there a way to measure the impact of advertising on a person's consumption decisions? Which brings us the the second implication

Measuring and modelling preference changes assumes some kind of rationality in the way individuals interpret and digest information (i.e, advertising)-- a system of cause and effect if you will. But what if individuals are really childlike in their preferences and supposedly rational adults don't know what they want? What if at the decision point the relations between x, y, and z are still changing? In this case, axioms on revealed preferences do not even hold-- choosing x over y doesn't necessarily imply that x is preferred to y because the individual was just as likely to choose y over x at the decision node.

So what now? Well, obviously economic theorists should do a lot of introspecting regarding the basic assuptions that are held so dear. Homo economicus might need a serious makeover to render economic theory more than just a thought exercise. What economists now consider as "irrational" behaviour for Homo economicus might actually be the norm for many (or most) decisions made by Homo sapiens.

But more importantly, we as consumers should start thinking about our decisions and preferences. Do we even know what we want? How and how much do advertisements influence our decisions? What do we really derive from the goods that we consume? Are we now increasingly defined by what we consume?

I consume, therefore I am?
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Thanks to dr. sbdink for thinking of the title.