CHAPTER IX WHAT ABOUT CONSUMER JUDGMENT?

Here is an influence upon the “X” factor about which little can be done except to apprise consumers of its vagaries hoping, but not very expectantly, that thus apprised, some of the blame for some of our troubles will find its correct resting spot.

The matter cannot be dealt with intelligently unless we first agree that the problem to be solved is the elimination of impoverishment. The mere elimination of impoverishment does not presuppose a satisfaction of desires in any respect except that of food, clothing, shelter, heat, sanitation, health and literacy. Perhaps others would set a different standard for the non-existence of impoverishment, but for the sake of this argument this standard will suffice. The satisfaction of more desires is, of course, a worthy objective. But we would do well more unanimously to get out of the impoverished grouping.

Those in the impoverished group, hardly able to garner the requisites above stated, err if they make purchases of additional so-called necessities or luxuries. To the extent they thus engage themselves, to that extent will they be without these bare necessities. They will either be without them, thereby increasing their impoverishment, or they will throw themselves on the community to supply these needs. In either case the ultimate impoverishment will be the same for if they throw themselves on the community, that cost will eventually reflect itself in the purchases of the impoverished and they will be able to buy correspondingly less. In other words, a man who cannot provide his family with simple necessities, makes a sad mistake if he buys a radio or an automobile. This is one example of how bad consumer judgment makes the poor poorer and how it subverts the “X” factor.

We constantly hear the damnation of our production and distribution machinery. They are widely alleged to be the root of the impoverishment evil. Little or no thought is given to consumption behavior, which really is more the cause of our difficulties than the two combined! And pathetically enough, and contrary to all popular notions, most of the source of the trouble lies among the millions in the lower income groupings where remedial measures are extremely difficult.

The majority of these people have cast overboard the old habits of thrift which dictated the purchases of simple necessities previous to the acquisition of needless luxuries. Their yearnings for non-essentials, heretofore reasonably suppressed, have today been unwisely released. High pressure advertising and selling methods, plus the child-like advice of political and economic neophytes, have united in confirming their bad judgment. Money that should have gone for three quarts of milk, a loaf of bread and a peck of potatoes, is spent for five gallons of pleasure gas, a movie or a pint of “red eye,” and the economic system is denounced because they don’t have milk, bread and potatoes. This picture has more than fifty million variations!

We have indicated some of the effects of inflation: stock market, currency and government credit. Consumer judgment often creates an inflation almost as serious. When consumers go into the market and purchase goods for which they have not yet earned the money—when they charge goods for immediate use to possible future earnings—they are likely to set dangerous wheels in motion. The extent of the danger lies in the extent of the practice. Large-scale installment buying of luxury goods that have no relation to productive necessity starts a mushroom production in motion. Unless the mushroom expansion with its naked purchasing power goes on ad infinitum, and it cannot, there has to be a let-down, a depression and insecurity. Unemployment and serious maladjustments must result. All caused by an excessive anticipation of desires.

Those in the higher income classes do not assist the poor when they engage in the purchase of goods and services not useful to their productive efficiency.[1] It could be easily demonstrated that the waste of a pork chop by a family of affluence has a detrimental effect on the impoverished. There is no difference, except in degree, between the wasting of a pork chop and the “AAA” practice of destroying little pigs. Each practice lessens the supply in ratio to demand and therefore raises prices which places pork chops farther from the reach of those who cannot get enough pork chops. If the waste of a pork chop is regarded as an infinitesimal waste and therefore without consequence, merely multiply the wastes of all products by 130,000,000 people and the total wastage will be found to be terrific. Here is another example of the detrimental effects of bad consumer judgment.

A point, most imperfectly understood, is that the fruits of science, better methods and technological advance have been dissipated in a thousand and one ways of which bad consumer judgment is one. This dissipation has absorbed much of the advantage, many of the gains that should have gone to those who are today in the impoverished classes.

One finds many people of affluence, and therefore example-setters, who sincerely believe they are fighting the battle of the poor but who, because of a lack of knowledge of this simple economic truth, are not only wasteful and profligate themselves but are advocates of theories that make for more waste and more profligacy. They think to buy something for which they have no use is to give employment for the production of the useless article, thereby helping the poor. More than likely, many of these well-to-do people would see no harm, in fact they might see good, in buying a basket of bread and throwing it away. Many of them “caught on” to the fallacy of throwing away bread in the form of not planting wheat, but the equation in their personal case is more complicated and they have not yet thought it through.

It is precisely this type of thinking that has developed the American pyramid idea, the idea of boondoggling, of furnishing unnecessary work on useless projects. It is precisely this kind of thinking that demands that science produce a new industry, something like the radio or the automobile, which, because of the popularity of the product and the size of the operation, will absorb the unemployed. To reiterate, the very people who have emotionally dedicated themselves to the poor are the most ardent advocates of these theories. There is a world of difference between an emotional and a studious analytical dedication to a cause. From the standpoint of the poor, emotional intentions are divine, but their consequences are usually devastating.

These emotionally inspired people fail to see that frugality and conservation must ever remain a nation-wide practice, no matter under what sort of an economy or how far that economy may advance. They fail to see that when we divert our energies from the production and distribution of useful things—of necessities—we have less energy left to produce and distribute necessities. Assuming that the impoverishment problem is the one we want to solve, then useful things are food, clothing, shelter, heat, sanitation, health and literacy. When we wastefully divert energy from their production we lessen the supply and consequently raise their prices. That is inescapable and is as exact as two and two are four. As we raise the price, the necessity gets more and more out of reach of the poor.

It can be argued that if a person wants to waste something, that is his business. So it is. It can be argued that if a person wants luxuries, wants things beyond his necessities, that also is his business. So it is. But present waste and present extravagance would be ever so much less if people only knew the bad effects of waste and extravagance on the poor. Too many think these vices are virtues. Too many think they are helping when they are really hindering. They think they are solving a problem when they are actually aggravating it. The difference between intentions and performances on the part of many well-to-do, example-setting people is about as wide as the difference between desire and satisfaction on the part of the poor. Perhaps if the former were narrowed, the latter disparity would narrow also.

Compare with these well-intentioned people the trainer of a marathon runner. He is sincere, his objective is worthy—he wants his runner to win the race. However, he lacks experience in training marathon runners. Having once felt the exhilarating effects of a stimulant he reasons that ten stimulants would give ten times the exhilaration so he gives this advice to his entry. Being better able to comprehend the effects of excessive liquid stimulants than we are of economic stimulants, we readily imagine, without difficult thinking, what happened to our marathon runner.

Tracing any given behavior to its economic effect is, to say the least, complicated and confusing. Few minds, even those possessing the peculiar faculty for this type of thinking, arrive anywhere without laborious and studious effort. As a consequence, so very many conclude the direct opposite of the economic truth. Too many qualify for the kind of experts who avoid minor mistakes as they sweep on to the grand fallacy. This explains, in part, why so many devoted to the cause of the impoverished, actually practice and loudly advocate actions that directly contradict their intentions.

If a person wants to be wasteful, that is his business. If a person wants to buy luxuries that he cannot really afford, that is his business also. If one wants to buy non-necessities that he can afford, certainly that is his business. But, in the name of Heaven, let us put these practices where they belong—let us forever earmark them for what they actually are: personal indulgences and nothing else. Let us get it out of our heads, individually and collectively as governments, that these indulgences, except only as they stimulate the indulger to greater productive activity, assist in solving the problem of impoverishment. Rather if excessive, they aggravate it and serve as one of the impediments to its solution.

This whole question is a matter of objectivity. The right to indulgences, or, to be more generous, the right to luxuries and the finer products of life above the impoverishment level, should be regarded more as the result and less as the cause of progress. These benefits, these implements to an easier life, must be thought of as rewards for meritorious practices, as rewards for the virtues of abstinence, thrift, invention, frugality and efficient organization and never thought of as reasons for economic and social advance. If indulgences were the cause of progress, we could advance by encouraging drunkenness.

The correction of our thinking on this point alone would have an advantage more profound in its effect than most of us are willing to imagine. Correction of our thinking in this respect would put an end to “priming the pump” theories, to boondoggling, to highways that serve no economic need, to projects for the sake of sheer spending, to “buy more” programs, to waste for the purpose of helping someone and to numberless inanities that characterize individual and national behavior. What an incalculable boon just this one change in reasoning would be to the impoverished—what a world of wonders it would eventually work for more goods and more services for more people!

Many will describe these lines as those of a reactionary. On the contrary, these lines are more radical than the tenets of Communism! Why? Simply because they advocate more completely an overthrow of present trends and present thinking than does the Communistic formula! Our whole behavior is approaching the creed of the collectivists, the socialistic state and the proletarian thinking and control more rapidly than it is tending to contradict these recommendations.

Extra-necessities, those above the impoverishment range, and luxuries have, however, an important place in the solving of impoverishment. Man essentially is a selfish animal. Therefore, it behooves us to harness this selfishness the best we can in such a way that whatever man does will redound to the benefit of the whole society.

That is the reason we have developed an economy with many incentives. Americans have attempted to perfect a system that will reward merit in accordance with its perfection. We have proposed to induce man to produce wealth not only with the reward of necessities and extra-necessities, but with the promise of luxury if he does well enough. That this luxury, if used wastefully, adversely affects the impoverished is granted but, and this is all-important, the impoverished are better off, not relatively but really, than if the luxury had not been a reward. Without extra-necessities and luxuries as a reward, man would have produced only enough for himself and in most cases barely that.

If, with extra-necessities and luxuries as stimulants, a man does a ten-thousand-dollar job of production and a nine-thousand-dollar job of wastefulness, society has gained a net one thousand dollars.

It should be obvious then that tools, bare necessities and physical and mental equipment are not all that contribute to productive efficiency. The lure of something better, the extra-necessities and the luxuries furnish a stimulus to production in a very real and considerable manner.

A system that permits the attainment of luxury and at the same time keeps opportunity for luxury open to all is a system worth the struggle to preserve and to perfect. The purpose of this thesis has been to define the “X” factor and to demonstrate that its development is the key to wide-open opportunity.

The impoverished or those near to that classification, should take comfort in the fact—a fact imperfectly understood—that no man, whatever his wealth, can consume or use or enjoy a very excessive amount of necessities and luxuries. Frankly, there is a greater detriment to the poor from the indulgences of the medium income groups and likewise of the poor themselves, than from the indulgences of the very high income groups, not only because there are greater numbers of the former, but quite often because the indulgences of those with small and medium incomes are more excessive than those with higher incomes.

No matter how rich any man may become, there is a definite limit to the part of his wealth he can enjoy for himself. Professor Thomas Nixon Carver offers a cogent point:

“A rich man of today may own few . . . articles of luxury and self-indulgences. His riches consist mostly of producers’ goods, that is capital. An Oriental prince, with a room full of jewelry, is a rich man but not a capitalist. A rich capitalist may live on crackers and milk, wear very plain clothes and never indulge himself in any luxury.

“If you are rich as an Oriental prince is rich, your riches are for you and your favorites alone. Your riches do not have to work for anybody else. But if you are rich in capital, your capital must work for somebody else. If it does not, it is worth nothing to you and you are not rich. In order to get anything for yourself out of your capital, it must be put to work helping to produce what others want. No matter how selfish you are, the possession of capital harnesses your selfishness to the work of producing for others. Here is a clear case of harnessing the motive sometimes called selfishness, but more accurately called differential generosity, to the public interest.”[2]

That part of the rich man’s income, beyond that which he personally uses, is capital and, to do him any good, must find investment. Whether he invests it himself or permits a bank to do it for him is of little consequence. The point is, his investment goes into some form of production or distribution, creating competition in some field, forcing improvements and therefore lower costs, which bring goods and services within the range of lower brackets of purchasing power.

Over-indulgence, on the part of rich or poor, subverts the “X” factor. Nevertheless, to remove extra-necessities and luxuries from the field of opportunity would destroy incentives that cause more useful production than the producing energy they divert. To remove these incentives would be penny wise and pound foolish.

This matter of consumer judgment, in spite of its importance, is one about which little can be done beyond that which each consumer desires to do. Intelligent educational programs, a rebirth of the thrift theme, discouragement of uneconomic advertising and selling methods and the discovery of a “Maxim Silencer” for demagogic humbuggery appear to be requirements. No doubt a more felicitous behavior would result if all consumers perfectly understood the consequences of their actions. Anyway, the wasteful and the profligate, whether they be poor or rich, will look less foolish if they cease to advocate other methods of subversion to solve a problem to which they are no mean contributors.

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[1] Productive efficiency is dependent upon a wide variety of factors of which the lure of luxuries, even needless luxuries, if such a term is admissible, is a most important factor. If a rich man would produce as well without being wasteful as he would produce if he were wasteful, the poor would gain by the behavior.

[2]Christian Science Monitor, June 17, 1936.