Consumption, Spending, and Happiness

In the 19th century "consumption" was the most commonly used term for what we now call tuberculosis. At the same time "spending" was the commonly used literary term for what we now call orgasm.

That being the case, no one was pondering the question of whether consumption would make you happy. And those who were thinking that they could spend their way to happiness were too discreet to discuss the issue.

Nowadays, the country is recovering from a decades long spending and consumption binge. People are pulling back, pulling in, spending less and saving more.

Not surprisingly, we are now seeing stories telling us that this forced downsizing will make us happier than did our previous free-spending ways, but, still and all, for most people it is not fun.

It is certainly not good for the economy. As Stephanie Rosenbloom explains in her New York Times article, people have been traumatized into making debt reduction a priority over spending, and this is going to impact a consumption-driven economy negatively. Link here.

The key, however, is that this new habit has been produced by  a severe trauma. While we can rejoice in how resilient people are, truth be told, we have all, to some extent, been traumatized by the recent financial crisis, and are not likely to resolve the problems it revealed any time soon.

Voluntary or involuntary, self-impoverishment is not necessarily a good thing. When people make sacrifices they usually expect to reap future rewards for their thrift. In fact, as research has shown, you feel better with a possession or an experience that you have saved for than one that you purchase on impulse.

When it dawns on people that cutting back is not just a new parlor game, but is a way of life... I wonder how happy they will be.
Take the couple Rosenbloom reports on, Lance Smith and Tammy Strobel. Having decided that they had too much they reduced their worldly possessions to something like the bare minimum. Two people living in 400 sq. ft. feels like a bare minimum to me.

Ms. Strobel is now happier with less. She is happier with her new work than she was with her previous job as a project manager with an investment firm.

But she is also happier because she has eliminated $30,000 worth of debt. On her previous salary of $40,000 that would have been a high level of debt.

And we must add that one reason the Smith-Strobels downsized is that Mr. Smith is pursuing a graduate degree.

Is this couple happier because they are no longer living large? One does not imagine that they were living very large on a $40,000 salary.

Are they happier because they are debt free? One does imagine that this would contribute to their quota of happiness. After all, it is one thing to spend money you have; quite another to spend someone else's money. If the all of those fine objects that occupy your mantelpiece are a permanent reminder of the payments you have to make to the credit card company, this would surely inhibit their ability to make you happy.

Appearing to be wealthy and being wealthy do not provide the same degree of happiness.

As everyone knows, conspicuous consumption has gotten a bad name. It has had one since Thorstein Veblen coined the phrase in his book, The Theory of the Leisure Class (Oxford World's Classics).

Conspicuous consumption can mean many different things. Let's examine a few.

It can refer to ostentatious displays of wealth by the nouveau riche. They are, after all, an easy target. Everyone seems empowered to laugh at those who are awkward for seeming to be out of place, for not having learned the local customs.

Yet, condemning those who started with little and ended with much has long been an aristocratic sport. It implies that those who earned their way and their success are not as admirable as those who have been, as they say, to the manner born.

But, if you had to choose between a status hierarchy based on blood and one based on achievement, which would you prefer? Keep in mind that aristocrats are generally conspicuous in their displays of wealth and privilege.

Admittedly, there is a degree of awkwardness in anyone who moves up the status hierarchy, but as long as we promote social mobility we are going to have such things, so why not show more generosity of spirit to those who have earned their way up the ladder.

The other reason why conspicuous consumption rubs people the wrong way is that it contradicts the ethical notion that people should only display their wealth discretely. One must mention that people who live well beneath their means are often known to be people of considerable means.

Anyone who follows the ethic of inconspicuous consumption is saying that displays of great wealth are likely to make those who have less feel like they are less. Such displays must be avoided as a gesture of respect for other people.

Veblen's point makes more sense if we consider that some people  feel compelled to consume the most and to spend the most because they feel that they must ensure that no one treats them as though they were of lesser status.

So far, so good. In principle they will finally feel sufficiently secure in their status to avoid grandiose public displays.

If they do not, they might fall into the pattern of making consumption and spending into ends into themselves.

Which means that they will be consumed by consumption, and spent by spending. Their behavior will look like an addiction; the more they do it the less satisfaction they get from it.

And anything that separates you from other people, and that undermines your social ties will make you unhappy

Happiness, as all the recent research has discovered, involves socialization. Develop more and better friendships and you will be happier. If you spend your money on vacations or dinner parties or trips to the theater-- that is, on shared experiences-- you will be happier than if you spend it on mere objects.

Of course, buying an object can involve investment and not spending. By definition, investing and spending are not the same thing. In principle, the object of your investment will have intrinsic value that might increase over time.