The New Descartes

Victor Lebow Journal of Retailing 1955 Our enormously productive economy demands that we make consumption our way of life, that we convert the buying and use of goods into rituals, that we seek our spiritual satisfactions, our ego satisfactions, in consumption. The measure of social status, of social acceptance, of prestige, is now to be found in our consumptive patterns. The very meaning and significance of our lives today expressed in consumptive terms.

The consumptive Mandate As expressed by Lebow effectively puts the US and then the world on the BAU trajectory to use more than 1 Earth to meet its consumption demand. An alternative view point: Every man must decide whether he will walk in the light of creative altruism or in the darkness of destructive selfishness

Living Planet Report 2012 Resource Base Wealthy Nations Increasing real world gap Developing world catching up

The Water Scarcity Problem

Recommendations from LPR14 – the new big E  Preserve Natural Capital: Protected Biodiversity  Produce more efficiently  Consume more wisely  Redirect financial flows to support sustainability  Equitable resource governance:  Equitable resource governance also requires a changed definition of well-being and success that includes personal, societal and environmental health  What little e process will work to achieve this?

Scaling Premise – any commodity that essentially remains a constant percentage of median household income will experience significant consumption. Note: The correct scaling factor is median income – not average income

Recent Median Income Behavior Peaked at 56K Jan 2002 Jan 2008 Its now about 5K lower and looks to be remaining flat (with some small fluctuations) For 2015 we will use 52K as median income for comparison to 1950s

Income vs Inflation 1950 Median Income = $ Median Income = $52,000 Income Scale factor = But Inflation rate from 1950 to 2015 is 9.7 so incomes have risen about twice as much as inflation. This means more consumer disposable income and preservation of the consumptive mandate

Car Prices 1950 Average New Car Price = $1500 (47% of median income) Inflation price = $14,500 (obviously too low for average 2015 car price) Income Scaled 2015 price would be = $24,300 which is approximately correct so income scaling has been preserved

House Prices 1950 House: $8500 (2.65 incomes) Inflation Price: $82,500 (can you buy a house for 82K?) 2015 Scaling: $138,000  (can you buy a house for 138K) Clearly Housing Prices don’t scale at all. This is a Bubble. Bubbles collapse and the market collapses. Didn’t this just happen?

Consumer Electronics 1950 TV (Large Screen at the time): $250 (8% median income) Inflation price = $ Income Scaling: $4100 (wow) 50 inch LEDs now can be had for about $400 so consumer electronics have become much cheaper due to advances in technology. (note 1950 price of a clock radio was $60)  more electricity consumption

Basic Items don’t scale with inflation – cost significantly more cents  Inflation $1.16 cents  $1.75 Hershey 5 cents  48 cents McDonalds 15 cents  $1.46 (kind of close) Corn 16 cents  $1.55 UO tuition $110 per term  $1067. (1/2 of what it really is now)

Things scale in different ways Some products do scale well with median income Many products scale with inflation and therefore become more affordable with time  this creates new markets for other things Some things (e.g. bread and housing) rise faster than wages

Spend it if you got it The phenomenal rise of disposable income in the US up until the bubble burst

Spend it if you Don’t Got It

Summary Consumption is great and improves standard of living provided there is sufficient surplus There is no longer sufficient surplus No one believes this so we maintain the consumptive mandate Solutions to this require a change of values – not economic controls