[postintro]This article continues the occasional series from Professor Raushan Gross on The Institutions Of Entrepreneurship. Entrepreneurship is a powerful pathway to innovation, growth, prosperity, and a better life for all. Its emergence and thriving are not automatic; it requires enabling institutions. Professor Gross will analyze and explain the institutional supports required for entrepreneurship to play its role in elevating society to the highest levels of achievement.[/postintro]
The writer of a recent Forbes article doesn’t want consumers making their own choices about what to buy and how much to buy. Instead, he provides a plan for consumers to avoid what he calls excess consumerism. In other words, what the writer suggests is essentially that “excessive consumption” is terrible for you and everyone else.
To put the matter mildly, the concept of “excessive consumption” has no basis in how flesh and blood people operate in the real world. This view of excessive consumption does not account for the fact that people’s goals are not focused on buying stuff. They are making individual choices using their own income and making their own decisions to fulfill their own needs and wants. They are not seeking the judgment or moral approval of Forbes writers.
One thing is for sure, and that is people prefer to obtain what they want now rather than later. Real people have time preferences – this statement is far from new. Each of us has time preferences, and we express these preferences in the market, where we make decisions on how we spend our time and income. For example, if I asked you to choose between taking $50.00 today or $50.00 in two years, which option would you choose? If you had the option to purchase bread for $1.50 today, would you buy the same loaf of bread tomorrow for $3.00? These examples clearly show that people make their choices to satisfy their want-satisfaction under personal time preferences. Unfortunately, the idea of consumerism, or excessive consumption, posed by the recent Forbes article clearly shows a widespread misunderstanding of how real people operate in the marketplace.
The Consumer Confidence Report finds consumer confidence has improved since December 2020, including a reported uptick in January 2021, and stated that “Consumers’ expectations for the economy and jobs ……..advanced further, suggesting that consumers foresee conditions improving in the not-too-distant future.” This is good news for consumers and producers. Consumers are confident in the market conditions for consumption, and guess what – the customer still rules!
Let us face it, the idea of excessive consumption in the aggregate is all wrong. Those who support the notion of excessive consumption do not see human behavior as it is but rather how they think it should be. What is essential for a functioning marketplace is not buying more than a Forbes writer believes that one may need, but how people choose to buy more or less of what they want. The market process is about consumers making personal choices using their own time and income to buy what makes them happy and is useful toward their goals. What is wrong with that? I love coffee, and I tend to buy coffee from different places, and I buy beans to make coffee at home. Should a coffee shop owner tell me that I can buy only one bag of coffee because three bags of coffee is excessive? This is true of most things like shoes, streaming movies, and exercise downloads. What may be more for one person can very well be less for someone else.
You see, when it comes to consumption, people tend to pick and choose for themselves what is excessive and what is not. The Forbes writer’s proposition is: what is excessive to me should be excessive to everyone else in the world. However, excessive consumption cannot go beyond what is produced—as we all know, there is scarcity.
Like most people, I want to buy what I deem useful, necessary, and has value. For one thing, consumers are not bumbling idiots – they have goals in mind as they shop for items. Consumers are attentive to prices, needs, timing, and market conditions related to their situation. As long as excessive buying does not harm others or is illegal, they should enjoy an economic system that produces material goods for consumers’ purposes and enjoyment. My enjoyment is a hot cup of joe, and you enjoy power tools or clothes. We can enjoy these things because we earn income to buy them, and they bring joy.
Let us get to the point; consumers who “buy excessively” are, in reality, exercising their freedom in the marketplace. Consumers can determine on their own to either buy fewer or more significant amounts of bread; however, if they buy fewer amounts of bread, they will cause the incomes of wheat producers to fall. On the other hand, consumers who purchase more video game downloads raise the incomes of people employed in that industry. Moreover, the opposite effect happens when consumers are told not to make their own choices in the marketplace. Do not buy more than two cups of coffee a day as that is excessive. Ha!
We must remember that production takes time. Rome was not built overnight, and neither were the items bought in-person or online by millions of people every day. That means if less is purchased, less will be produced in the future.
Producers and manufacturers determine what to make more or less of based on market demand. Demand begets production. The market provides for those willing to buy, and people who are not willing to buy do not stimulate production. Producers accommodate mass demand with scarce resources. Consumption is a balance of scarcity and abundance, and the outcome creates more choices for consumers. You see, economic thriving does not revolve around buying stuff, it is the outcome of consumer choice.
On the whole, excessive consumption may not fulfill a Forbes writer’s desires, but it may bring true happiness for some people. People who buy – whether excessively or not – fulfill their economic role of supporting business owners and their local community. To assert that consumers should stop “excessively” buying products assumes away the prospect that people do not change shopping patterns or increase family sizes over time. I was always told that you do not bite the hand that feeds you. The market is the only social place where the coordination between consumers and producers can facilitate goals and mutually beneficial choices for everyone involved via the buying process. These “excessive” purchases fuel the economy, which helps all people flourish and live their best lives.