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Materialism and Economics

December 18, 2012

“Desire is a valley which can never be filled.” – Scott Sumner

Economists spend a lot of time thinking about buying stuff, but aren’t typically very materialistic. While this might seem paradoxical, there are a couple of good reasons for it. Being aware of which types of purchases are correlated with higher happiness and well-being limits one’s propensity to spend on useless things. Materialism is for poor people. The more your life revolves around getting the material goods you need to survive, the more you care about those goods. Lack of materialism is a luxury that only the rich and stable can afford, and economists tend to be rich and stable.

Economists have a long history of discussing materialism. Adam Smith was openly disdainful of those who were overly materialistic (TOMS IV.I.6), but at the same time was willing to classify objects which people needed to be presentable in society as necessaries:

“By necessaries I understand not only the commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without. A linen shirt, for example, is, strictly speaking, not a necessary of life. The Greeks and Romans lived, I suppose, very comfortably though they had no linen. But in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into without extreme bad conduct.”
The Wealth of Nations V.2.148

Thorstein Veblen continued the tradition, disparaging “conspicuous consumption” and positional arms races, and modern economist Robert Frank continues the fight today. When you spend all your time thinking about how society satisfies human desires, you can’t help but analyze those desires as well. Everyone needs food, clothing, and shelter. Humans are a social creature and a lot of what makes us happy is our relationships with other people. If everyone else expects you to have a certain standard of living, it’s the not the linen shirt per se that makes you happy, it’s the fitting in and social status that it gives you.

maslow

Trying to out conspicuous consumption everyone around you is a fool’s errand. There will always be someone richer than you, and making yourself look richer than you are will just result in poverty long term as money is wasted on slightly better luxury versions of things. Purchases which increase happiness are those that allow you to experience things you otherwise wouldn’t or those which allow you to spend time with friends and family. People acclimate to living conditions over time. Rather than running ever faster on the hedonic treadmill, it’s better to savor what you have.

Further Reading:
Frank, Gilbert, and Wolfers discuss happiness and materialism
How being materialistic can make you happy
Happy peasents and miserable millionares.
Buying happiness one small purchase at a time.
Deirdre Mccloskey on Happyism
An apropos passage from the Theory of Moral Sentiments

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