must know how to analyze what is consumed in order to erect a superstructure of economic principles explaining consumption. We must know what the thing is which we seek to explain in order to create an adequate explanation. The central significance of this descriptive approach to the subject is, therefore, that a realistic foundation has been attempted for the further elaboration of principles and laws. Knowing what is consumed, we must next inquire why it is consumed. The next chapter therefore deals with the reasons for consumers' choices. The consumer occupies the rôle of chooser in the economic drama. He continually selects and rejects, in arriving at the final wants which seek satisfaction. The forces which develop new wants and which stifle old wants will be examined. The principles which account for consumers' choices will be the goal of the analysis. BIBLIOGRAPHY ANDREWS, B. R., Economics of the Household. Edition of 1924. COPELAND, M. T., Principles of Merchandising, Chapter VI. HARAP, HENRY, The Education of the Consumer. HOBSON, J. A., Work and Wealth, a Human Valuation. MARSHALL, ALFRED, Principles of Economics, Book III. NATIONAL BUREAU OF ECONOMIC RESEARCH, Income in the United States, Volumes I, II. NATIONAL INDUSTRIAL CONFERENCE BOARD, The Cost of Living in the United States. PATTEN, S. N., Essays in Economic Theory. PEARL, RAYMOND, The Nation's Food. PIGOU, A. E., Economics of Welfare. ROBSON, W. A., Relation of Wealth to Welfare. ROSE, M. S., Feeding the Family. Edition of 1924. RUSKIN, JOHN, Unto This Last. SEAGER, H. R., Principles of Economics, Chapter V. SHERMAN, H. C., Food Products. Edition of 1924. UNITED STATES BUREAU OF LABOR STATISTICS, Cost of Living in the United States, 1924, No. 357. UNITED STATES FOOD ADMINISTRATION, Food and the War. WALKER, F. A., Political Economy, Part V. WATKINS, G. P., Welfare as an Economic Quantity. CHAPTER VII PROBLEMS OF CONSUMPTION Consumption a Matter of Making Choices.-The power to decide what shall be consumed rests in the hands of the consumer. This power is so important that the observation frequently made is: The Consumer is King. By his free selection and rejection of commodities, the consumer dictates what shall and what shall not be produced. Consumers' choices determine production schedules. Likewise, consumers' choices determine what shall be demanded. They fix demand schedules. Realizing the pivotal power contained in consumers' freedom of choice, business men engage in all kinds of aggressive selling tactics to persuade, cajole, and inveigle the consumer in his choice-making. Realizing the danger to the consumer from ignorant and injurious choice making, the government passes legislation to prohibit certain choices and to compel others. Thus, choice making is circumscribed with many contending interests, trying to guide and misguide the consumer in one direction and another. The purpose of the present chapter is to analyze the forces which condition and determine the choices of consumers. The Freedom to Choose Modified by the Economic Conditions of the Time. Freedom of choice is purely relative to the economic conditions of a given time and place. Primitive man could not elect to ride in Pullman cars. Medieval man could not telegraph or telephone. The housewife of colonial times could not utilize electrical household appliances. The frontiersman could not select the menu of a modern metropolitan hotel. The freedom to choose is limited by the industrial conditions of the day. Consequently, we must view the phenomena of choosing as something progressive and dynamic. The choice making of today is quite different from that of tomorrow. The process is in constant evolution and development. The basic conditions underlying modern choice making may be summarized under two headings: the technology of production, and the workings of the price system. Consumers' Choices Affected by Technology of Production.—The variety of goods in modern consumption is the outgrowth of the methods of modern production. New forms of food and clothing, new articles of taste and luxury, new devices of comfort and amusement have been invented for the consumer until he is surrounded by a bewildering array of possible choices. The range of choice has been immensely widened. Formerly the consumer had a limited selection of coarse and monotonous foods, but today the delicacies and tidbits of the far corners of the earth are assembled on a single menu. A century and a half ago, Adam Smith could write that the accommodations of "a frugal and industrious peasant exceed that of an African king, the absolute master of the lives and liberties of ten thousand naked savages." This observation was passed before the advent of the age of steam and electricity. Since that time, producers have perfected for the market countless articles for consumption. Industrial laboratories devote a large part of their scientific research to the discovery of new products to satisfy human wants. The result is evident, for instance, in the contrast between a modern metropolitan department store displaying endless variety of goods and a former rural shop or itinerant peddler displaying a narrow and cramped bagatelle of homely articles. The division of labor has brought also a division of consumption, and range and variety have been substituted for narrowness and monotony. Secondly, the volume of choices has increased. The consumer can select not merely greater variety, but also greater quantity. This advance is due to the increased efficiency of production. Because the machine technology increased the output from a given expenditure of labor, it provided for the consumer a greater volume of goods per capita than any previous industrial régime had provided. Some articles, such as food, do not permit any material increase in volume of consumption. The rich cannot eat more in quantity than anybody else. Consequently the increases in volume of consumption have been directed chiefly to those articles which provide convenience, comfort, recreation, amusement, and luxury. In all these lines increased quantity of consumption. has revolutionized standards of living for the working classes as well as for the wealthy classes. Thirdly, the quality of choices has been affected. Routine production and mass output result in a form of output which lacks individual taste and character. Much of the product is uniform and monotonous. The attempt to embody beauty in goods by mechanical devices meets with results which are offensive to eyes accustomed to the artistry of handicraft. Critics are quick to detect all that is vulgar, mean, and shoddy in the machine product. Adulteration, debasement, substitution, lead to inferiority in quality. All of these observations rest upon a definite element of fact. But there is another side to the problem, and one of great importance to the mass of the people. Mass output of the comforts of life has made possible an amount of beauty and excellence in the life of the common man which was utterly impossible in former days. The coarseness and misery of the masses is in process of being replaced by machine-made comforts and luxuries. The artistic qualities of machine-made goods may not compare with the best hand work in a bygone age, but they surpass the meanness which in all previous periods of history has hung like a pall about the head of the common folk. We may conclude, therefore, that the quality of machine-made goods is not necessarily inferior to the hand-made goods otherwise available to the masses of the people. Standardization of quality is the logical device whereby the machine-made product guarantees service and reliability to consumers. The choosing of standard products is the choosing of products of known quality. Fourthly, the production technology affects the consumer's choices. by the direct influence which the machine environment exercises over his whole life. The individual viewed as a producer is simply the consumer in the making. His work is a part of himself. If one-third or more of his life is spent in factory or mine, his character is cast in the mold of his toil. The victim of fatigue and monotony is not in a position to make certain choices at all. The laborer who is exhausted from his day's toil is not in a position to enjoy reading, music, or any of the higher arts, after the day's work is ended. The ability of the consumer to make and enjoy his choices is determined by his experience in the day's work. The kind of toil which he endures conditions the kind of choice making which he can enjoy as a consumer of goods. Not only is his enjoyment limited by his working conditions, but also it is limited by his living conditions. City congestion, screaming street corners, huddling and crowding, hectic amusements, cramped housing, and all the metropolitan orgy of noise and fury throw their influence over the consumer. His choices are conditioned by all the phenomena associated with the concentration of population in urban communities under the modern factory system. Finally, the additional leisure put into the worker's life since the advent of the eight-hour day opens a new problem of choice making. What shall the worker do with his leisure? Much of the new opportunity is wasted upon dissipation and vice. Much of it is devoted to recreation and amusement. Some of it is devoted to art, reading, and education. The use of the additional two to four hours of leisure depends upon the choices which the worker makes with regard to his consumption. In summary, we find that five important results accrue for consumption from the modern methods of production: First, the range of choice is greatly widened; second, the quantity of choices is greatly increased; third, the quality of choices is seriously altered; fourth, the effect of working conditions upon the ability of the consumer to express his choices is far-reaching; fifth, the increase of the leisure hours in which choices have to be made opens new problems of right choosing for the consumer. All of these factors grow out of the technology of production. Closely interwoven with them are factors of another type,-factors which grow out of the price system of modern business. These factors relate to the pecuniary aspect of economic life. They are of importance because consumption consists of the spending of money incomes. Choice making, viewed in this way, is a problem of finance. Consumers' Choices Affected by the Workings of the Price System. The importance of the pecuniary aspect of consumption has been clearly stated by Wesley C. Mitchell as follows: "Instead of producing the goods their families require, men 'make money,' and with their money incomes buy for their own use goods made by unknown hands. The economic comfort or misery of a modern family, accordingly, depends not upon its efficiency in making useful goods and its skill in husbanding supplies, but upon its ability to command an adequate money income and upon its pecuniary thrift. Even in years when crops are short and mills are idle, the family with money need not go cold or hungry. But the family without money leads a wretched life even in years of abundance. To the single family, then, prosperity and depression appear not as problems of the adequacy of goods produced, but as problems of the adequacy of money income. "To the nation the making of money is important in a fashion quite different. Comfort and misery do not depend upon the aggregate of money incomes received by its citizens: they do depend upon the abundance of useful goods. Efficiency in producing useful goods is important to an individual chiefly because it enhances his ability to make money; money making is important to a nation chiefly because it enhances the efficiency of production." 1 The means of expressing consumers' choices is wholly pecuniary. That is, it consists of the pricing of goods in terms of money. Consumers vote for the selection of certain kinds of goods and for the rejection of others by deciding for which goods they shall spend their money. Consumers' votes are dollar votes, and everybody who spends. a dollar thereby casts a vote for the selection of the given kind of goods. The consumer makes his choices effective solely in so far as he pays out his money for articles desired. However much he may wish and dream for other goods, if he does not spend his money for them, they are not a part of his economic choices. The consumer's choice-making consists of a series of decisions as to how, where, and when dollars shall be spent. By casting such dollar-votes, consumers determine production schedules. If consumers stop spending money for a certain commodity, producers must forthwith stop producing the commodity. If consumers increase the spending of money for a certain commodity, producers must forthwith increase the production of the commodity. What is to be produced depends directly upon what consumers will buy. All producers bow at the slightest whim of the consumers, when that whim is expressed in dollars spent. The making of goods follows where the spending of money leads. Whoever spends money is the absolute dictator of production. In the eyes of business, the consumer is a moneyspending monster. The shift of choices from one article to another means the ruthless annihilation of the producers of the one article and the prosperity of the producers of the other. Production schedules are set by the pricing of goods, production is guided by the spending of money, output of goods lies at the mercy of the intake of dollars from consumers. Pecuniary decisions rule the course of industry. Since choices make themselves manifest through prices, they are 1 Business Cycles, p. 21. |