Recommended reading: Empire of Things

In 2015-16, Australian households consumed $929 billion of goods and services. Consumption is central to our economy. In the Great Depression, John Maynard Keynes exhorted Britain’s “patriotic housewives” to spend money at the sales, lest they put a man out of work for a day by saving five shillings. In the most recent financial crisis, our former Prime Minister Kevin Rudd urged us to spend our stimulus payments, the so-called Rudd money, after his Treasury Secretary Ken Henry advised him to “Go hard, go early, and go to households.”

Consumption, now or in the future, is the ultimate purpose of economic activity. And the study of consumer behaviour is at the core of economics. So, as an economist, I was incredibly delighted to find a history of consumption was published earlier this year, titled Empire of Things: How We Became a World of Consumers, from the Fifteenth Century to the Twenty-First. It was written by Frank Trentmann, a History Professor at the University of London, and it is available at Dymocks’s Queen St Mall store, which has an excellent collection of economics and finance books.

empire_of_things

The book’s main thesis is that our modern materialistic lifestyles and consumer culture have deep historical roots, going back many centuries. In an excellent summary of his argument in the closing chapter, Trentmann observes:

“Almost all the forces driving up consumption were in place by the time Western states embraced sustained growth in the 1950s: the rise in domestic comfort, fashion and novelty; shopping for pleasure; a taste for articles from faraway lands; rising levels of water and energy use; the cult of domestic possessions and hobbies; urban entertainment and pleasure; credit and debt; and the notion of the ‘material self’, which recognized that things are an inextricable part of what makes us human.”

Trentmann surveys how these forces drove consumption over many centuries, reviewing the growing consumption of a range of goods including coffee, tea, sugar, cotton and porcelain, among others.

The book recalls the great controversies over consumption, include Marx’s critique of capitalism and “fetishism” regarding commodities, Veblen’s concerns about “conspicuous consumption”, and more recent concerns from environmentalists regarding the sustainability of western lifestyles. Trentmann echoes mainstream economists when he argues that resource scarcity is not something we need to worry about at the moment, particularly considering that prices will rise as resources become scarcer, encouraging more efficient use; but we may need to worry about un-priced external impacts (what economists call externalities) such as greenhouse gas emissions.

Trentmann is highly insightful when it comes to the deficiencies of the former socialist economies in the Soviet Union and Eastern Europe in meeting the needs of their consumers. Popular support for the socialist economic system was eroded by the clear superiority in range and quality of western consumer goods. Referring to shoddy and technologically deficient products, including cars such as the Tranbant, that were produced in economies such as East Germany, Trentmann notes many workers in socialist economies came to lose pride in their work, as they knew the goods were of poor quality relative to what was produced in western economies. This was ironic given that socialist economies were meant to exalt the worker.

I also found Trentmann insightful regarding the luxury goods market, which he divides into two markets: the traditional high-end luxury market, for “classic Porsches and Tiffany” and other ultra-expensive luxury goods, and a second market for accessories such as handbags and watches, which are relatively more affordable. The motivations for the consumption of luxury accessories are not necessarily what you expect, particularly among consumers in emerging market economies. Trentmann observes:

“The demand for luxury accessories is no longer primarily about emulating the very rich. It is about a sense of belonging to a global ‘modern’ middle class, about vertical inclusion rather than hierarchical distinction. This is one reason for the popularity of luxury brands in Asian markets, including China, with its stellar savings rate. For millions of urban secretaries, going off to work with the same handbag and sunglasses conveys the feeling of being part of the modern world.”

Luxury accessories are no longer necessarily about distinction and exclusivity, but about the experience the goods provide.

I highly recommend this book to economists and historians, and also to market researchers and sales people, who need to understand the factors that will motivate customers to choose particular products among a myriad of alternatives in this empire of things.

Advertisements
This entry was posted in Uncategorized and tagged , , , , , , , . Bookmark the permalink.

3 Responses to Recommended reading: Empire of Things

  1. Alistair Robson says:

    I suspect market researchers and sales people already “understand the factors that will motivate customers to choose particular products among a myriad of alternatives in this empire of things”. One advantage of studying Commerce at Sydney Uni is I get to talk with a variety of different business professions beyond economics (incidentally the Economics discipline at Sydney Uni is not a part of the the Business School – which tells you a lot about the professions standing now, for better or worse). It is very surprising how advanced knowledge in these business professions of these consumer economic concepts is, they often use different words than we use but the outcome is usually the same. I often feel we economists are the ones who need “catching up”. We seem to live in a bubble which looks down at these business professions and think we have lots to teach them. Increasingly though I’m finding it is us Economists who are fooling ourselves.

    There have been other era’s where consumption has been prominent, for example Gittens wrote an article about the classical (in the BC’s for these light on the topic) Athenian economy (from a book by Oxford uni’s Peter Acton) and said “By classical times the basic daily wage was about six times that required for subsistence, and half Athens’ population lived a life that was better than the typical Briton’s in the 18th century.” (http://www.rossgittins.com/2016/10/breaking-news-classical-athens-had.html). Another interesting part of Ross’s article is where he says “The social mobility, employment opportunities and relatively even distribution of wealth that accompanied the rise of commerce helped Athens to avoid the revolutions that the Peleponnese suffered regularly.” We know that social mobility, employment opportunities and distribution of wealth have generally been fading for some time now in Western economies; and, raises the question of what point will these factors be sufficient for a societal kickback? It would be sad to see socialism or some other related philosophy take away the benefits of a largely free market system. But our economies seem to be pushing these boundaries, potentially bringing about Brexit, the rise of Trump, etc. Watch this space!

    • Gene Tunny says:

      Thanks for the comment, Alistair. Interesting points about the possible consequences of increasing inequality. Upon reflection, my concluding sentence was poorly phrased. I never meant to suggest sales people or market researchers don’t know about consumer behaviour. I really meant to say that books such as this one can enhance their understanding. I agree economists should be open to the lessons of other disciplines.

      • robsonap0 says:

        No problems Gene. It’s a problem when you can’t edit comments. There are times when I wish I could recall or edit a comment!

        It’s been an amazing journey taking and working with business oriented colleagues as opposed to economists. It really opens your eyes to the wider world.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s