CHAPTER XXXIX

RATIONAL CONSUMPTION

Difference between a high and a rational standard of living. Economists have generally classified standards of living on the basis of their cost or expense. A high standard of living has meant merely an expensive standard; a low standard of living has meant simply a cheap standard. Very little attention has been given to the difference between a rational and an irrational standard. By a rational standard of living is meant one which increases the margin between one's production and one's consumption. In the formula V=P-C, as given in the preceding chapter, the most valuable man is one in whom P exceeds C by the greatest margin. The purpose of the present chapter is to contend that the most rational standard of living is one which produces the most valuable man.

This margin of difference between P and C would be increased, of course, either by decreasing C, by increasing P, or by doing both at the same time; that is, if, without reducing in any degree a man's efficiency as a producer, he were to reduce his cost of living, he would thereby be adding to his value from the standpoint of progress. To that extent he would enable the community to produce more than it consumed. He would thus be a factor in the accumulation of productive power or of the durable products of civilization. If, however, by reducing his cost of living, he at the same time reduced his productive efficiency in the same proportion, there would, of course, be no gain, and there might be some loss involved. If, on the other hand, by spending more on himself, especially on books and other means of education, on tools, or on more nourishing food, he were able to increase

his productive efficiency, his increase in consumption would more than justify itself.

From this point of view the problem for every individual is to adopt that standard of consumption which will leave the largest margin between production and consumption. From the same point of view it would frequently be necessary that one man should spend more on himself than another would be justified in doing. Take, for example, a great surgeon, whose time is exceedingly valuable, not only to himself but to the community he serves. He might very properly keep an automobile, a chauffeur, and other time-saving devices and agencies. He might even keep a valet to look after his clothes. If these forms of expenditure would enable him to give more people the benefit of his skill, it would be to their advantage for him to spend money in these ways. This applies to all others whose time and services are valuable to the community. For the same reason he might, by increasing his consumption in various ways, increase his production more than enough to pay the added cost of his living. But an inexperienced surgeon, whose time is not valuable to the community, who, in fact, has time to spare, could not properly indulge in the same time-saving devices. For such a person to employ a valet or even a chauffeur would be ridiculous waste and ostentation.

Buying trinkets is not good for business. In opposition to this point of view there is a popular theory to the effect that lavish expenditure is somehow good for business. The difficulty with this argument is that it always assumes that if the individual is not consuming lavishly, he is not spending but hoarding his money. It is surely as good for business and labor that one should spend money on builders and architects as on milliners and confectioners. He who consumes lavishly spends his money on confectioners, milliners, and other producers of immediate and temporary satisfactions. He who consumes rationally spends as much money as he who consumes lavishly, but spends it on things which build and improve,

rather than on things which merely afford temporary gratification. A community of lavish consumers would, of course, give actual employment to those whose work is to amuse and gratify, but little employment to builders and others producing for future generations. A community of rational consumers, on the other hand, would give more employment to those who build for future generations, and less to those whose work is to gratify the interests of the immediate present. There is no essential difference in the amount of money spent in the two cases, provided the two have equal quantities of money to spend. The difference is in the way they spend it and in the direction they give to enterprises and industry. The community that spends money in building for future generations will improve from generation to generation; each generation will inherit from the preceding one a larger fund of durable wealth, and will add to this and bequeath a still larger fund to successive generations.

Buying durable goods is investing for the future. If we we) were to start these two communities side by side, with equal numbers and equal natural resources but with different habits of consumption, it would not be many generations before a marked difference could be seen between the two communities. The community which spent its income for immediate gratification would fall behind the one which spent a part in building for the future. It would not be many generations before the latter community would outstrip the former, and the people from the former would be emigrating to find employment and other advantages in the latter.

The miser and the spendthrift. Instead of placing the miser and the spendthrift in opposite categories, we should really put them together. The miser is a lavish consumer in a most important sense. A consumer is defined as one who uses wealth for his immediate gratification. In a previous chapter consumers' goods were defined as goods used for direct and immediate satisfaction. Now a miser, instead of using his wealth

productively, keeps it for his direct and personal enjoyment. With extreme gratification he counts his hoard. He loves to handle it, to see it glitter, and to hear it jingle. He is in the strictest sense a consumer of gold. He is very much like the spendthrift in that he gives up everything in order to get gold and to enjoy it personally, just as the ordinary spendthrift gives up everything for personal enjoyment of other kinds. If, instead of hoarding his gold in his cellar, our traditional miser were to use it in gilding his house, no one would doubt that he was a spendthrift. Whether he hoards his gold in his cellar or uses it for purposes of adornment makes very little difference. The same amount of gold is withdrawn from circulation, and much the same effect on the market is produced in either case. Both the miser and the spendthrift should be contrasted with the rational buyer, or the investor in durable goods. The true investor buys goods of which he himself will probably never be able to absorb the full utility. He buys goods that will last so long that future generations will get a part of their utility. Those future generations will therefore have a better start than he did. If this is kept up indefinitely, generation after generation, by all members of the community, it will be a very prosperous and progressive community; but if each individual of each generation merely says, "What has posterity ever done for me that I should be called upon to do anything for posterity? Let us eat, drink, and be merry!" that will always be a backward community.

The case of rival communities. It was suggested above that if two communities started side by side with equal natural advantages but with different habits of spending, we might get a test of the comparative merits of those habits. This may be used likewise as a means of testing, in imagination at any rate, the rational quality of a standard of living. That standard of living which would enable a community or nation to make the most rapid and permanent progress would have to be commended. Something depends, however, on our definition of

progress. There may be about as many ideals of progress as there are people who have ideals. Without attempting a full and complete definition, it would seem fairly safe to suggest that among other things progress should include general improvement in comfort, well-being, and satisfaction.

The whole life of the nation as well as of the individual to be considered. Whether this form of progress is worth what it costs or not is another question. The individual spendthrift doubtless thinks that his immediate satisfaction is more important than his future well-being or that of his descendants. He therefore endangers his future well-being for the sake of satisfaction in the present. To him progress is not worth the price. The price is present abstinence. He would probably not deny that saving and economy would make for progress, that is, would make him better off in the future. He would merely say that he did not care for progress so much as for present gratification. So with a spendthrift nation; it might agree that accumulation of wealth and improvements in comfort and wellbeing would be characteristic of progress and that thrift and economy would contribute to that end, but it might decide that it did not care so much for progress as for present gratification. A nation feeling this way gets what it prefers. The future, however, probably belongs to those individuals and those nations which possess more of the time sense, to those who are able to think of the whole of life as a unit rather than of every moment as sufficient unto itself.

Leaving out of the discussion for the present the question as to whether prosperity is worth while or not, but assuming that it is worth while, the test which we have suggested would be a good one. What standard of living, if adopted and followed persistently, generation after generation, would increase the comfort and well-being of the community and develop the power to support increasing numbers of people and support them better, to add to the productive power of each generation, and ultimately to raise the economic, social, political, and even