Shopping is not patriotic

by Russ Roberts on November 29, 2005

in Standard of Living

We’re past Thanksgiving so it’s time for the annual holiday shopping and buying frenzy.  My mailbox will fill with catalogs.  The parking lots at the mall will be full.  Department store aisles will be crowded with shoppers looking for bargains and the perfect gift.  Keyboards will heat up as on-line shoppers surf for bargains.  Ipods and cameras and DVD players and cashmere sweaters and power tools and books and CDs will go whistling from factory to truck to store to homes.

It’s also time for innumerable stories about how important shopping, particularly holiday shopping is for the economy.  How were the numbers over the weekend?  Sterling?  Luke warm?  Disappointing?

Eugene Robinson in today’s Washington Post sums up this view nicely (rr) when he admits feeling guilty about not shopping:

If I don’t
patriotically spend enough this Christmas, will I be responsible if the
whole thing collapses?

Consumer spending represents
two-thirds of the economy, and the frantic month between Thanksgiving
and Christmas is prime time for retail sales — for some merchants, up
to one-quarter of their yearly total. It has penetrated the national
consciousness that how well the nation’s retailers do during the
Christmas season is seen as a powerful indicator of America’s economic
health.

All weekend, there were breathless reports
on the news: Huge crowds waiting for the stores to open on Friday!
Disappointing sales at the end of the day, down 1 percent from last
year! A big rebound over the weekend, with total sales up 22 percent
from last year! But maybe only the big discount chains did well, and
the specialty stores are quiet as a tomb. Or maybe it’s just electronic
goods that are selling like hotcakes, and everything else is gathering
dust on the shelves. Or maybe not.

Each of us has to bear part of this burden, and I resent it.

I have good news, Eugene.  You can safely put down that burden (or fail to pick it up in the first place) without guilt or resentment.

The retail sales numbers are important if you’re a retailer.  Or a stockholder of a retailer’s shares.

But our well-being doesn’t depend on shoppers piling up their carts in advance of the holidays.

What are the roots of this strange belief that for our economy to be healthy, we need people to buy stuff?

Keynesian, probably.  Something to do with the idea of the multiplier.  That somehow, the more we buy, the more the money races around and the richer we all get.

The biggest error in that way of thinking is thinking that the economy is separate from all of us.

Suppose every American decided that life is too fast-paced, that the pleasure we get from material things is fleeting and that we all need to spend more time with our families.  Suppose every American decided to look for part-time jobs with half of the hours we currently work.

The result would be an economy that was half as large as the current one.  But that transformation would be good, not bad.  Assuming that we indeed found that additional family time to be as satisfying as we had expected, then our economy would be healthier.  We would be happier and better off.

The only footnote to this point is that if we all made this decision overnight, the transition to a smaller economy would be traumatic.  But if it happens gradually, it would be fine.  Having an economy half of the current size would be good if each of chooses to spend more time at home and less time in the commercial side of life.

Too many stories about holiday spending imply that spending has some sort of positive externality, that the benefits extend far beyond the buyer and the seller and that to stay home by the fire in the fireplace playing the guitar or reading to your children is somehow unpatriotic.  This is foolish.  Spend, if it gives you satisfaction.  Otherwise, stay home and spend more time with your wife, your children and your guitar.

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{ 8 comments }

Randy November 29, 2005 at 10:10 am

Sounds good. But, doesn't income redistribution depend on the total size of the pie? That is, isn't our ability to support those who need supporting dependant on the creation of surplus(?) wealth?

JohnDewey November 29, 2005 at 12:25 pm

Fortunately this is just a theoretical argument.

It seems to me that a 50% reduction in worked hours will lead to a nearly 50% reduction in goods and services. I don't see how that could be acceptable to anyone.

The non-wage overhead for every firm that is now spread over X amount of output would be spread over X/2 amount of output. The loss of economies of scale would drive costs higher. Profit margins would shrink, and one result might be a reduction in innovation.

As Randy pointed out, surplus wealth would not be available for redistribution. Promises made to retirees would be broken.

I'm not an economist, so I'm probably missing something. But I would guess that even a gradual but large reduction in output would be an economic disaster. I would not want to live in such an economy. I enjoy too much the toys and conveniences I can only afford by working fulltime.

KipEsquire November 29, 2005 at 12:29 pm

Of course, every dollar you spend is a dollar that you're not saving, which some would argue is more a patriotic action than spending. Go figure.

Noah Yetter November 29, 2005 at 12:44 pm

The point that you're missing, JohnDewey, is that if the economy shrank because we chose to work less, it would not be a disaster preciesly because we chose it.

If I choose to spend more time with my family and so switch to a part-time job, the choice to consume less is implicit in that decision. But it doesn't make me worse off. We know this because I freely chose to do it.

If everyone in the nation did likewise, they would also not be worse off. We would know this because they made the same free choice.

The "less goods = economic disaster" thinking assumes that more goods is always better. This is generally a safe assumption, but sometimes people want less. The thought experiment in this post is, what if everyone wanted less? And when you understand it, you realize that our well-being isn't about stuff, it's about getting what we want. If what we wanted was less stuff and more of the things we give up to get stuff, then making that trade would make us better off, not worse.

JohnDewey November 29, 2005 at 1:22 pm

Good points, Noah, though I don't agree with all of them.

I think if we all tried to trade half our work hours for half our goods and services, we'd end up with less than half the original goods and services. Unless every single person selected the same set of goods and services to forego, economies of scale would be lost.

From a practical standpoint, everyone could not work half the hours they currently work. The demand for physicians would drop only slightly. That and many other occupations require a level of intelligence that is just not limitless. If the very intelligent decided to work parttime, I fear we'd see a sharp decrease in standard of living. On the other hand, many of the boobs I've seen in corporate offices could go home and stay there without affecting economic output in the least.

Dog of Justice November 29, 2005 at 9:06 pm

The "less goods = economic disaster" thinking assumes that more goods is always better. This is generally a safe assumption, but sometimes people want less. The thought experiment in this post is, what if everyone wanted less? And when you understand it, you realize that our well-being isn't about stuff, it's about getting what we want. If what we wanted was less stuff and more of the things we give up to get stuff, then making that trade would make us better off, not worse.

I think the real problem here is military.

For all I know, Native Americans were very happy and, as far as they were concerned, very well off before Europeans arrived. (This may not have actually been true, but that doesn't affect the gist of the argument.) But ultimately they did not exist in isolation, they existed in parallel with other civilizations. Via generations of accumulated work and some serendipity, several of those civilizations acquired the ability to invade the Americas. There is no way the Native Americans could have defended themselves indefinitely without having done a comparable amount of work.

It can be argued that the existence of doomsday devices like thermonuclear weapons frees us from this race; maybe we really can get away with essentially arbitrary amounts of leisure now. Roberts could very well be correct now. But if, between the American Revolution and 1941, we had all been working half the hours we actually did, we would not have been well-equipped to handle the trials of the subsequent four years, even if we had been happier during the previous 160…

Russell Nelson November 30, 2005 at 2:00 am

Yes, it's a Keynsian idea. You'd be surprised how many people haven't updated their understanding of economics since the 1980's when Keynes ideas were thoroughly trounced. Basically, people know what they learned in college, and they haven't learned anything since then.
-russ

ANM December 1, 2005 at 4:09 am

You can be an ardent libertarian/capitalist without supporting the gluttinous consumerism that infects America today. It's just that 99% of the time, when someone starts ranting about materialism, they immediately pounce on capitalism as the source. Ask John Taylor Gatto, and he'll tell you it's because of schooling (he found in his research that the purpose of public schools were to create a docile work force, per the demands of industrial barons. Thus the prominence of the Rockefeller foundation and Carnegie Endowment in education.)

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