IEA Blog

Anti-consumerism as a gut-feeling has been around for ages. But the attempt to rationalise the sentiment in economic terms is a product of our times – and a successful one at that. With titles like The Spirit Level, Affluenza, All Consuming, The Selfish Capitalist, Prosperity without Growth, Britain on the Couch, Consumed and many more, anti-consumerist literature has become a thriving consumer-good market.

Here’s anti-consumerist economics in one lesson: suppose two individuals, X and Y, attain a monthly consumption level of 100 gold coins each, and are perfectly happy with it. Now X decides to increase his weekly workload slightly, in order to increase his consumption relative to Y. He generates 5 additional gold coins, and spends them on a good which has no practical use whatsoever; it merely serves as a marker of social status vis-à-vis Y.

Y is now under zugzwang. He decides to reduce his annual holidays in order to increase his consumption to 110 gold coins. Y does not derive any pleasure from the additional goods he buys either. They merely serve to demonstrate his ability to keep up with X.

The retaliation of X is not long coming, and so the arms race begins. There is no way out, because given each individual’s preference for a high status relative to the other, both behave rationally from an individual perspective.

A narrow-minded old-school economist would say: “Great, GDP is increasing, economic growth is high. Everything is getting better.” An enlightened anti-consumerist economist would counter: “Look closer. Both X and Y now have stomach ulcers from overwork, take antidepressants, their family lives are brittle, and their social lives are in tatters. They are richer – but only in useless status symbols.” In the words of the Spirit Level authors:

“If an important part of consumerism is driven by emulation, status competition, or simply having to run to keep up with everyone else, and is basically about social appearances and position, this would explain why we continue to pursue economic growth despite its apparent lack of benefits. If everyone wants more money because it improves self-image and status in relation to others, then each person’s desire to be richer does not add up to a societal desire for economic growth” (pp. 224-5).

But there is a daring logical step: from the mere fact that so-called “conspicuous consumption” exists, anti-consumerists conclude that apart from bread, butter and a dry bedsit, virtually all consumption serves no other purpose than status-signalling. This is like jumping from the observation “There are black-haired people in Finland” to the conclusion “Almost all Finns are black-haired.” 

A superficial glance at a large-scale expenditure survey is enough to cast doubt on the anti-consumerist premise. Yes, the average British consumer spends £110 per year on jewellery, clocks and watches; and £290 on hairdressing, beauty treatment and cosmetics. But he/she also spends £135 on milk, £450 on public transport services (excluding air travel), and £760 on insurance products. In total, most of us spend a large part of our budgets on things that are barely observable to others.

Besides, economies where absolute levels of wealth stabilised after having reached a certain level of development have already existed. This describes, more or less, the situation of Argentina between the early 1930s and the early 1990s. According to the logic of the anti-consumerists, Argentinians should have lost interest in material wealth, and fully dedicated themselves to family life and civic engagement instead. A visit to a shopping mall in Buenos Aires suggests otherwise.

If you haven’t read a book that made you laugh out loud on the bus or the Tube in a while, try Christopher Snowdon’s superb release, The Spirit Level Delusion (SLD).

But the book’s subtle humour is not the reason I am recommending it. The SLD is, above all, a book that delivers and goes well beyond the promise of its subtitle – “fact-checking the left’s new theory of everything”.    

It starts by exposing the empirical flaws in Richard Wilkinson and Kate Pickett’s The Spirit Level (SL), which claims that just about every social problem is caused by income inequality. Using where possible the same data sources as the authors, Snowdon shows that the results have been influenced by the choice of countries and indicators. Including just a handful of additional countries is enough to make many of the SL graphs, which show data points scattering around a straight line, dissolve into shapeless point clouds. Approximating the same abstract concept with a different proxy measure does either the same, or even reverses the correlation shown in the SL. And where this is not the case, an alternative explanation for the observed pattern is usually not too difficult to find.

Snowdon does not, of course, conclude that inequality “causes” positive social outcomes, or that the English-speaking countries perform per se better than Scandinavia. The SLD is not the inverse of the SL. Its message is merely that if you were searching for the philosopher’s stone, keep searching. The SL does not contain it.

The first three-quarters of the SL, while ultimately unconvincing, at least make an interesting and engaging read. Towards the last quarter, the SL degenerates into a conventional anti-consumerist rant. In this part, the authors repeat the same old story that the government should curtail our wealth and force us to live more simple lives, so that we can discover the things that “truly” matter. It is therefore appropriate that towards the last third of the SLD, Snowdon broadens his attack well beyond the SL itself. He critically examines a range of popular anti-consumerist literature and exposes it for the badly concealed, authoritarian elitism that it is.

When all is said and done, the SL is a variant of this strand of literature. It envisions a social system in which wise rulers prevent us from developing aspirations by insulating us from the sight of wealth and success, and thus protect us from the dangers of disappointment, failure, stress and anxiety. If a metaphor was to be chosen for this type of social system, it would be a giant playpen.

And this is precisely the reason why Snowdon’s full-scale attack is relevant. Some have argued that the SL was just a temporary intellectual fad which will be forgotten in a few years. But the wider idea that a happier society could be created by restricting people’s lifestyle choices and material possessions has come to fascinate many intellectuals, and it has been around well before the SL. The parallels with the ascent of socialism, described by Hayek in The Intellectuals and Socialism, are eerie. It may well be that the next big battle for a free society will be fought against the new anti-wealth egalitarianism. Christopher Snowdon has provided defenders of freedom with powerful ammunition.

Once upon a time, an old Nordic legend tells, there lived a princess in Burgundy who owned a huge treasure of gold. One night the treacherous Hagen von Tronje, an advisor to the king, broke into the treasury and looted it; but not for himself, nor for anyone else. Hagen stole the gold so that the princess could not have it. He feared the power gold could buy, so he plunged it into the torrents of the Rhine.

In Richard Wilkinson and Kate Pickett, Hagen von Tronje has two worthy modern-day successors. Their book, The Spirit Level, is a radical plea for egalitarianism. Greater income inequality, they argue, is correlated with just about every social problem. But unlike traditional egalitarians, the authors’ aim is not to raise the material living standards of the poor through redistribution. They believe that in the developed world, absolute income levels have become largely irrelevant: “Once we have enough of the necessities of life, it is the relativities which matter” (p. 225).

A number of concerns have been raised about the data, the correlations and the jump from correlation to causality – but I would like to focus on an entirely different aspect. It is only towards the end of the book, with climate change entering the stage, that things come full circle. We learn that in order to avoid ecological disaster, “we need to limit economic growth severely in rich countries” (p. 226). Not that this is a problem: “It is fortunate that just when the human species discovers that the environment cannot absorb further increases in emissions, we also learn that further economic growth in the developed world no longer improves health, happiness, or measures of well-being” (p. 216).

So here’s how the pieces of the jigsaw fall into place: as long as inequalities exist, people will not be willing to give up growth, because growth contains a promise - we may see lifestyles more luxurious than our own all around us, but in the near future we too may be able to afford the things that our wealthier neighbours afford today. Wilkinson and Pickett believe that the reverse relationship also holds: if our neighbours lose their luxuries, we too will lose interest in them. Remember, it is the relativities which matter. Eradicate inequality, and the scourges of consumerism and materialism will disappear, and we will live happily ever after in a climate-friendly zero-growth economy.

So everything seems to depend on the hypothesis that we do not actually want high material living standards - it is just that as long as we are exposed to luxurious lifestyles around us, we are too terrified to get left out. Yes, some studies on “Happiness Economics” suggest that absolute living standards do not matter for well-being, while relative living standards do. However, many suggest otherwise, and some even suggest the precise opposite.

Given this uncertainty, we face the risks of rejecting the above hypothesis even though it is correct (a “Type II error” in statistics), or of not rejecting the hypothesis even though it is incorrect (a “Type I error”). Which is worse?

If we commit a Type II error, people are still free to look for non-political ways of leaving the “consumerist” lifestyle behind. But if we commit a Type I error, we may find out in ten or twenty years time that we have thrown tons of gold into the Rhine for nothing. In the old legend, the Kingdom of Burgundy fell anyway in the end. The vengeful princess substituted political power for financial power. It turned out to be far more destructive.

Yesterday I appeared on the Radio 4 Sunday Programme. The programme is available online on the BBC iplayer at http://www.bbc.co.uk/programmes/b006qnbd until 2 January. It begins with a discussion of the work of Charles Booth and William Booth. The debate with Philip Booth comes about 36 minutes in.

Part of the programme looks at a book by Wilkinson and Pickett called The Spirit Level which suggests that more unequal countries lead to much worse outcomes for everybody. Wilkinson himself said on the programme that it would be better to tax the rich and throw the money away because the resulting increase in equality would be good for society. In my view, policies based on institutionalising envy should have no place in a civilised society. But, notwithstanding this, his premise about taxing the rich is based on the results of a great deal of statistical modelling about inequality which raise many questions.

I must confess that I have not read the book – I would genuinely welcome comments from those who have read it, or indeed from the authors. I have read some detailed summaries and reviews and the following points come immediately to mind.

- There is much made of the relationship between inequality and infant mortality – in particular the high rates in the US and the very low rates in the “equal” societies of Japan and Sweden. However, when I looked into this, I discovered that, in the US, every baby who is delivered and dies counts in the statistics, no matter how premature or how small. In Japan, deaths within 24 hours of birth are recorded as miscarriages; in Sweden, deaths under a certain birth weight are not recorded in infant mortality statistics. Apparently this, together with the higher number of migrants in the US (see below), explains the differences in recorded infant mortality.

- The authors make much of the relationship between crimes of violence and inequality – again the US being the outstanding example. However, we would expect crimes against property to be associated more with inequality and these are 2.5 times higher in Europe than in the US…Why are the authors so quiet about this?

- When problems are positively associated with equality (such as suicides) these are regarded as anomalies (to the authors’ credit they are not brushed under the carpet, they do try to explain this).

All in all, the message seems to be that homogeneous and closed societies that are not very receptive or attractive to migrants score well on equality. Large heterogeneous, dynamic economies that are attractive to migrants score badly. Migration, of course, helps cause inequality – as migrants are often moving to avoid poverty and they start poor, but this leads to some important questions. Why are migrants attracted to countries that are so unequal if all other quality of life indicators are worse in such countries as well? Why are migrants not clambering to get into Japan and Sweden? And why, in many respects, is Japan, if it scores so well on equality and so many other lifestyle measures, burdened with a huge debt and a catastrophically low birth rate that seems to reflect a huge degree of pessimism?

“Revealed preference” seems to suggest a desire to live in the US and the UK rather than in Japan, whatever the statisticians might think is rational.