Table of contents(13 chapters)
The theory of consumer choice fills the opening chapters of any micro-economics textbook. Yet, surprisingly, this position of privilege has not translated into a flourishing of economic research that is comparable to what has happened in other branches of economic reasoning.
A characteristic feature of economic development is the ever-changing structure of consumption patterns. Reducing the explanation of this phenomenon to changing prices, ultimately caused by changes in the availability of goods (or characteristics), would neglect a major force driving this change, namely, the variation of consumer wants and consumer knowledge. The present paper sketches an evolutionary framework for the analysis of consumer behaviour that takes account of these features.
For this purpose, Carl Menger's theory of goods is taken as starting point. Whereas economists after the ‘marginal revolution’ were almost exclusively concerned with the determinants of exchange value and developing price theory, Menger puts as much emphasis on user value as on exchange value. Focusing on how user value changes establishes a connection between Menger's 19th-century theory of goods and 20th-century learning theories. The problem of how to get from individual learning processes to aggregate consumption patterns is approached by recollecting the genetic underpinnings of human learning and its dependence on certain physical and social conditions. Taking into account that these conditions are also dynamic, we are able to interpret collective learning processes as historical events, which renders them useable for the analysis of economic change.
What Shall I do? (or Why Consumer Theory Should Focus on Time-Use and Activities, Rather than on Commodities)
The sole purpose of this simple paper is to present the idea that theorists of consumption, orthodox or otherwise, might do well to focus their attention on the use of time. ‘Economics is at bottom the study of how humans spend their lifetimes’ (Georgescu-Roegen, 1983, p. lxxxv), after all, and it thus makes sense to place time-use at centre-stage and to make sure that it is considered explicitly within consumer theory. Such an emphasis, it will be urged, enables the economic theorist to connect more easily both with certain other social-scientific and philosophical concerns and with many everyday common-sense concerns. ‘What shall I do?’, for example, is both a more frequent and a deeper question than, ‘What shall I buy/consume?’ (‘What ought I to be?’ is no doubt a still deeper – but less frequent! – question but is too difficult to be considered here.)
The consensus view is that economists should observe consumer choices and abstain from investigating the psychological and physiological causes of wants, or the mechanisms governing the formation of preferences. This may be a correct procedure as far as ordinary functional goods are concerned. Problems tend to arise with creative goods (e.g. cultural goods) whose consumption (i) requires skills acquired through education and experience and (ii) generates positive and negative feedbacks and learning-by-consuming processes. This paper presents a simple model of local learning explaining the idiosyncratic accumulation of consumption human capital. Consumption generates local feedback mechanisms whose characteristics depend on the nature of goods and on the type of agent. The model provides some insights on the microeconomics of creative consumption and on the specific role of education.
Film has a number of characteristics that define it as a commodity-type and hence distinguish it from other commodity-types.4 Not only is film non-diminishable in consumption (because it is consumed in the mind of the viewer), but also the images that make up a film are infinitely reproducible and, in the era of digital technology, reproducible at near zero marginal cost. Furthermore, each film is to some extent novel in that its constitutive images are each unique and so is the ordering of the images into the sequenced continuity that makes the film meaningful to (but not, ipso facto, liked by) the consumer.5 Hence, prior to the consumption of a film, consumers cannot have a complete idea of the visual and aural cinematic utility that they are going to experience, nor of their reaction to that experience. Films are thus experience goods: an experiential divide exists between the two mental states of awareness, namely expectation and realization, both of which entail a learning process based on previous experience (Nelson, 1974, p. 745). A final element in the ontology of film as a commodity is the rapidly diminishing utility of film in consumption. That is, once consumed in theatrical release, films are rarely revisited theatrically by consumers, who commonly prefer the anticipation of new cinematic pleasure to the repeat viewing of old pleasures.
At the end of the nineteenth century, in the era of the second industrial revolution, falling working hours, rising disposable income, increasing urbanisation, rapidly expanding transport networks and strong population growth resulted in a sharp rise in the demand for entertainment. Initially, the expenditure was spread across different categories, such as live entertainment, sports, music, bowling alleys or skating rinks. One of these categories was cinematographic entertainment, a new service, based on a new technology. Initially it seemed not more than a fad, a novelty shown at fairs, but it quickly emerged as the dominant form of popular entertainment. This paper argues that the take-off of cinema was largely demand-driven, and that, in an evolutionary process, consumers allocated more and more expenditure to cinema. It will analyse how consumer habits and practices evolved with the new cinema technology and led to the formation of a new product/service.
A number of papers have empirically investigated the demand for cinema by applying the rational addiction model proposed by Becker and Murphy (1988). However, they fail to take account of the relationship between movie and television consumption. The purpose of this paper is to extend previous works on cinema demand by including both cinema and television movie consumption. To this aim a panel-data generalized method of moments (GMM) methodology is used to estimate a dynamic model of double rational addiction as proposed by Bask and Melkersson (2004) using a sample of monthly time- and cross-sectional series covering the 20 Italian regions over the period 2000–2002.
Smoking initiation by adolescents has been analyzed by economists as a choice reflecting prices, tastes, and subjective evaluation of the long-term risks of addiction and disease. What is missing from this account is the fact that smoking is a social activity and is subject to peer influence. Peers may serve as a source of information about why and how to smoke, and how to obtain cigarettes. Peers also serve as an audience, observing and evaluating others’ behavior. This evaluation is mediated by the long association in popular culture between smoking and a variety of attributes prized by adolescents. Like choice of fashion in hair and clothing, body piercing, comportment, and so forth, smoking by adolescents connotes information about identity. Knowing this, the decision of whether to smoke is partly a decision of what identity to project.
The task of this paper is to explore the interplay between fashion, consumer lifestyles and economic growth in the context of a world of technological change in which the menu of possibilities that consumers face is constantly changing and tending to increase in length. Our working definition of ‘fashion’ is simple, namely the tendency or behavioural norm of actors to adopt certain types or styles of customs or commodities nearly simultaneously, only to adopt a different type or style of custom or commodity in future periods. The demand spikes associated with fashion may pertain to newly introduced products or to products that have been around for some time; they may also occur in hybrid cases where a seemingly defunct product or genre is given a brief rebirth by being reincarnated in terms of a new technology.
One of the many paradoxes of fashions is that consumers’ choices change rapidly and with an astonishing degree of synchronization. What is successful or socially acceptable in one period is considered the opposite in the next. This paradox has brought economists and other social scientists to conceive of fashions and fads as one of many forms of irrational behavior. Herd behavior and weakness of will, a desire to conform or, conversely, to distinguish oneself, have all been invoked to explain the rapid evolution of modes of behavior that emerge and more or less suddenly disappear. In this paper we try to show that fashions, even if fragile and transient, might nonetheless be rational. It is a rationality, however, that has to include something overlooked in most economic writing: the desire for novelty and variety. In fashions this desire takes the form of coordinated behavior that both facilitates consumption and destroys its novel content, thus paving the way for new fashions to appear.
Context is known to affect evaluation for many goods. For example, a house of any given size is more likely to be viewed as adequate the larger it is relative to other houses in the same locale. If evaluations of some goods are more sensitive to context than others, there is no presumption that privately optimal consumption patterns will be socially optimal. Rather, consumers will spend too much on goods whose evaluations depend most strongly on context and too little on those whose evaluations depend least strongly on context. For instance, if evaluations of houses are more sensitive to context than evaluations of leisure, then people will spend too much money on houses and too little time with family and friends. But if context sensitivity is the same for all goods, no distortions result.
This paper suggests theoretical grounds for expecting context sensitivity to differ across goods. Evaluations should be more sensitive to context for goods whose consumption is more readily observed by others and also for goods for which relative consumption is linked to other important payoffs. The quality of school that a child attends, for example, is often strongly linked to its parents’ relative expenditures on housing.
A survey of empirical evidence suggests that observed differences in context sensitivity track the differences predicted on theoretical grounds.