The evolution of consumption and its welfare effects

Abstract

In this paper the evolution of consumption is explained on the basis of a theory that connects preferences over actions to the motivational forces driving actions. More specifically, the hypotheses about what motivates consumption activities draw on insights from biology, behavioral science, and psychology. With secularly rising income, the growing consumption opportunities and the expanding consumption alter the underlying motivational forces and induce a change of preferences. As a consequence, the structure of consumption expenditures is systematically transformed. In the light of this explanation, the paper analyzes the effects of the growth and transformation of consumption on individual welfare. As turns out, the motivations driving the growth of consumption do not necessarily imply that this growth indeed results in welfare increases, particularly when the ability to spend on consumption is already high. Moreover, when preferences change, the measurement of the welfare effects of the growth and transformation of consumption depends on the arbitrary choice of a reference point. This implies an ambiguity that raises further queries about the normative foundations of the ubiquitous calls for continued consumption growth.