Consumption. Mark Hudson

sacrifice in the short term by paying high prices in uncompetitive markets, they would reap the rewards in the long term with newer, better and even unheard of products.

Conclusion

      This chapter examined the theories that put the best possible spin on shirt purchasing and the rest of our consumption activities. When we buy a shirt, it is because we want it more than other things that we could spend our money on. As put forward so long ago by Adam Smith, when we buy a shirt we enter into a voluntary trade with the seller that appeals to both parties’ self-interest. Consumers would only accept the trade if it improved their well-being. In making the exchange, the buyer is implicitly acknowledging that the shirt is worth more than the money for which it was exchanged. In this sense, no market-based consumption can be done without the consumer’s consent. The neoclassical introduction of rational, individual maximization implies that, in choosing the shirt, we are able rationally to weigh our options about what else we could have done with the money, from buying something completely different, such as a dinner out, to purchasing a shirt of a slightly different style and colour. This idea is as true for something as important as health care as it is for something arguably less life changing, such as a shirt.

This does not mean that everyone will be happy. Rather, it suggests that we have chosen the shirt because it is the best thing we could have purchased given our choices of products, our preferences and our income. As we shall see in some subsequent chapters, there is nothing inevitable about the link between individual rational maximization and the claim that commodity consumption is beneficial for the buyer. However, some economists, such as Friedman, have used the idea of well-informed consumer choice in competitive markets to argue that market competition delivers whatever the consumer wants at the best price. It is also true that it is not completely necessary to assume an individual rational maximizing human to arrive at the conclusion that people are well served by consumption activities. As the theories of Schumpeter, Lancaster and Katona indicate, it is possible for firms to drive consumption and inform consumers, pushing people to try new things and develop new tastes. Yet, even in this situation, in which firms take the lead in the consumption–production dance, they only succeed if their new products tap into a previously unknown consumer desire. In the savvy vs. sucker distinction introduced in chapter 1, the authors here are firmly in the savvy camp. In the next chapter we will introduce a theory of political economy that places these market activities explicitly in the economic system in which they take place, which creates very different conclusions about the extent to which consumers are savvy or suckers.