humans actually behave. An early pioneer in this area was George Katona. He was particularly concerned that consumers’ desires and motivations were being overly simplified by the neoclassical economic assumptions and sought to discover what people were actually up to in their purchasing behaviour (Caplovitz, 1966). Based on his analysis of extensive consumer surveys, Katona deduced that, although consumers did attempt to inform themselves on economic matters, they were often slow to learn, which did not square well with the assumption of rational maximization (Hosseini, 2017: 132). Habitual behaviour and genuine decision-making were, according to Katona, the two most common determinants of purchasing behaviour. “The American consumer is a sensible person and is a discriminating buyer who seeks information and tries to understand what is going on. … This does not mean that he is an ideal rational man. Old stereotypes and attitudes persist even when no longer applicable and habitual behavior is very common” (Katona, 1964: 333). While individuals may not be rationally maximizing in the genuine neoclassical sense, they are sufficiently well informed to understand their desires and are able to realize them through their purchasing behaviour.
The manner in which Katona interprets the role of advertising in society is a good example of how he viewed consumption. For Katona, advertising does not sway impressionable consumers into frivolous purchases. Rather, it plays a vital role in informing people about a product’s existence, function and price. Further, to the extent that a few commercials do attempt to sway people’s purchasing through “unreasoned appeals” which rely on emotion rather than fact, these are likely to work only for unimportant goods, such as toothpaste, on which people will not expend a great deal of time and effort in making their decisions (Katona, 1964: 58–9). The individual is “not a pawn moved about by marketers and advertisers at will” (ibid.: 333). Katona does reject that idea that people have individually determined “autonomous” preferences. He argues that people’s desires are primarily influenced not by the allure of marketing but by groups to which they belong, such as their family or friends. Like Schumpeter, Katona maintains that, because of product innovation, consumers do not really understand the full range of choices available to them. Many valuable products, from air conditioning, to automobiles, to cigarettes, were not originally wanted by consumers, but, once they were created and popularized, these products were successful only because they satisfied a genuine desire from consumers (ibid.: 55).
Katona’s normative conclusions about the role of consumption in society portrayed the growing mass consumption of the early 1960s in an overwhelmingly positive light. According to Katona, the neoclassical assumption of non-satiation was backed up by his survey data. The more people have, the more they want. As we shall see in later chapters, some critics of consumerism place a negative spin on this for a variety of reasons, but Katona argued that these growing aspirations are beneficial for the individual and the economy.
For the individual, the continued desire for materialistic consumption is the hallmark of a flourishing society in which the masses can obtain what, in the past, would have been the exclusive domain of the rich (Katona, 1960). “The common man can have what he likes rather than what he needs” (Katona, 1964: 4). For the economy, increased material aspiration is what encourages people to work hard, creating economic growth. “It is precisely the wanting and striving for improvement in private living standards that forms the solid basis for American prosperity” (ibid.: 65). Far from being wasteful consumption, this represents the triumph of a successful economy: “by raising the living standards of the American masses and demonstrating to the world at large that it is possible for the greater majority of the people to live decently, the United States has once against presented new goals and aspirations for all the world” (ibid.: 53).
Another slight modification of neoclassical theory stressed that consumers’ utility comes from the characteristics that goods offer rather than the goods themselves (Ackerman, 1997: 659). To use an example from K. J. Lancaster (1966), all dish detergents are not equal. They contain a bundle of different characteristics that consumers may find more or less appealing, from their cleaning ability to their scent. If the characteristics of the dish soap are altered, for example, by adding a skin softener, then it should not be considered to be the same good, providing the same utility to consumers as a detergent that leaves your hands dry and chapped. Here, again, advertising plays an important and positive role for consumers. Given the complex collection of characteristics embodied in any good, providing consumers with information on the diverse and beneficial “consumption technology” available to them fulfills an important social function. As with Katona, the role of advertising illustrates Lancaster’s general interpretation of consumption, which is that people’s choice between characteristics leads to maximizing their utility.
So, for Katona, Lancaster and Schumpeter, people are well served by an economy geared toward innovating new consumer products. For Lancaster, the inclusion of new features in a product actually changed the product, and if consumers approved of the new characteristic it would represent an increase in satisfaction from the same good or service. For Katona, the desire for more and more up-to-date consumer goods was not only good for those who had the wherewithal to purchase them, but it also provided a beacon of possibility and motivation for those who could not. Consumption beyond need, once associated with pride, vanity and wastefulness, became a virtue.
However, for Katona and for Schumpeter, against the grain of neoclassical conceptions, consumers’ preferences – only half-informed at best, in flux and socially conditioned – did not operate as the sole signal for what is to be produced in society. Entrepreneurs could tap into desires that were latent or unrealized, capitalizing on the plasticity of want. It was this latter group that provided the dynamism of capitalism, in Schumpeter’s view, and if consumers had to sacrifice in the short term by paying high prices in uncompetitive markets, they would reap the rewards in the long term with newer, better and even unheard of products.
Conclusion
This chapter examined the theories that put the best possible spin on shirt purchasing and the rest of our consumption activities. When we buy a shirt, it is because we want it more than other things that we could spend our money on. As put forward so long ago by Adam Smith, when we buy a shirt we enter into a voluntary trade with the seller that appeals to both parties’ self-interest. Consumers would only accept the trade if it improved their well-being. In making the exchange, the buyer is implicitly acknowledging that the shirt is worth more than the money for which it was exchanged. In this sense, no market-based consumption can be done without the consumer’s consent. The neoclassical introduction of rational, individual maximization implies that, in choosing the shirt, we are able rationally to weigh our options about what else we could have done with the money, from buying something completely different, such as a dinner out, to purchasing a shirt of a slightly different style and colour. This idea is as true for something as important as health care as it is for something arguably less life changing, such as a shirt.
This does not mean that everyone will be happy. Rather, it suggests that we have chosen the shirt because it is the best thing we could have purchased given our choices of products, our preferences and our income. As we shall see in some subsequent chapters, there is nothing inevitable about the link between individual rational maximization and the claim that commodity consumption is beneficial for the buyer. However, some economists, such as Friedman, have used the idea of well-informed consumer choice in competitive markets to argue that market competition delivers whatever the consumer wants at the best price. It is also true that it is not completely necessary to assume an individual rational maximizing human to arrive at the conclusion that people are well served by consumption activities. As the theories of Schumpeter, Lancaster and Katona indicate, it is possible for firms to drive consumption and inform consumers, pushing people to try new things and develop new tastes. Yet, even in this situation, in which firms take the lead in the consumption–production dance, they only succeed if their new products tap into a previously unknown consumer desire. In the savvy vs. sucker distinction introduced in chapter 1, the authors here are firmly in the savvy camp. In the next chapter we will introduce a theory of political economy that
