There’s more to the economics of consumption than (almost) unconstrained utility maximisation

Abstract

workshop by Warde (Chapter 2 in this book). In summarising, Warde said that the main message of his paper was, perhaps, that there is more to the sociology of consumption than Thorstein Veblen. This is an important message, and relevant for two groups. First, to his fellow sociologists, that they should not be preoccupied with the exceptional and conspicuous forms of consumption. Second, to other social scientists – economists like this author, for example – that we should not form the wrong impression of where the sociology of consumption is going. Moreover, it seems that it is of equal importance that this book should contain a chapter emphasising that there is more to the economics of consumption than the free choice and utility maximisation of ‘modern’ neoclassical consumer theory. Again this chapter should address two audiences: those mainstream economists who understand this message in principle, but still focus their energies on deriving ever more elaborate optimisation algorithms; and the other social scientists who still, mistakenly, believe that ‘there is nothing more to the economics of consumption than utility maximisation’. Between this introduction and the conclusion the chapter is divided into five sections. The first looks at the hard core of modern economics of consumption. In this, consumer behaviour is about utility maximisation – or, to be more precise, it is about an axiomatic theory of demand. If these axioms are accepted, then modern demand theory shows that the consumer behaves as if he or she were maximising an ordinal utility function. This ordinal function is very different from the cardinal utility function of Bentham. How can we characterise this modern theory? The theory is rigorous, certainly, and it has offered many professional economists the opportunity to demonstrate their technical bravura. But it is shallow in two senses: it seems to imply a very simplistic notion of how the consumer behaves but at the same time it actually contains very little empirical content. The second section looks back at the writings on consumption by the ‘giants’ – the nineteenth and early twentieth-century pioneers of economics. 3 There’s more to the economics of consumption than (almost) unconstrained utility maximisation