Maybe we don't need all that stuff - maybe our economy would be better off without some of it...Well, maybe we DO. The basis of this article is faulty in regards to the economic principles of consumer theory. According to what we have learned in class, consumer theory is one of the most important tools in the economists toolbox. How does the consumer decide what to buy? We assume they are making choices to maximize their utility subject to their budget constraints. This is based on the idea that MORE is always preferential to LESS. According to our models, if people aren't spending all income, they aren't maximizing their utility. Buying less because we don't need all we have, as the author suggests, is a violation of these basic economic principles.
This author makes a false comparison between the US economy and other nations by stating that as consumption accounts for 70% of our economy and comparing us to Greece, and lesser percentages in other countries, that we are somehow a greedy nation that doesn't need what it consumes and we would be better off consuming less. I believe this is a faulty and biased argument. What is this author terming consumption? Is it only Nikes and Prada purses? No, consumption includes a much greater range of items than this author gives credence too. Every transaction we make as individuals is a form of consumption. Buying a service is consumption. Getting an oil change is consumption. Going to the Doctor is consumption. Should be reduce these activities in order to align our economy with other nations? No, I think not.
As Prof. Eubanks spoke about in class, this author is viewing our economy as though this is how they WANT the world to be, not whats real or feasible.
September 20, 2010
Subscribe to:
Post Comments (Atom)
1 comment:
I think caution is in order, especially with respect to your first paragraph. The author of the article you comment on is, it seems to me, discussing a normative issue. Our model of consumer choice is positive, not normative. The assumptions we make are not really to be tested by what someone, like this author, thinks people should want or should be like. And, the assumption we make really aren't logically comparable to he author's normative assertion about what people should or shouldn't want, or how the author thinks people should or shouldn't act.
Also I would point out that we can use our consumer choice model to consider an individual's choice about saving and borrowing. This can be done by saying good X is consumption today and good Y is consumption in the future. Certainly a person can choose to save out of income, and it seems to me reasonable to think that consumption in the future is pretty much like consumption today.
Finally, I think the premises of the author are off the mark with respect to how the world of human action actually works. For example, the premise that the economy "works" on consumption is inaccurate, at least because there will always be 2 sides to any market or transaction, i.e., the consumption or demand side and the production and supply side.
Post a Comment