Tuesday, July 05, 2016

Over consumption

Consumption is measured using household final consumption expenditure

Is there an economist in the room?  'Household' to include a couple of hobos under a bridge through to a family in a Point Piper mansion. Perhaps the homeless, by definition, don't constitute a household. Hostels, boarding houses and nursing homes do though.

The figure is that paid by the consumer, inclusive of tips or taxes.

The countries with the largest department stores and shopping malls, swineherds, mines, retailers, warehouses and factories are stuffed with consumers. This makes sense. They are cultures geared for consumption.

Service hasn't been rendered but it is included in expenditure. As is wages and rent.


Apart from those on a diet or ascetics of every kind, most of us are happy consumers. Coming from a farm, I never lost the novelty of having such easy access to transport networks, fresh bread and milk, takeaway.

So pikelets are consumed; made from flour, milk, caster sugar, egg and butter. You bought these pikelets at a local fete or you made them yourself: sifting the flour and proud of the milk from your cow and eggs from your chickens. There are varying expenses and people paid for their goods or service - churning the butter, for example - though the literal consumption makes that final phase in the chain of production easy to identify.

Now let's consider the wooden ruler. It's produced for a market. The miller of birch, oak or boxwood is confident that a product made from his raw material can sell to stationers and newsagents and they in turn know that students will come in looking for just such an item. They may not all have an intimate knowledge of every other link in the chain of commerce but they know the current demand.
Perhaps for the manufacturer of the ink there's enough to know that the person buying the ruler will rule a straight line or measure something rather than whacking it around and damaging it, it really doesn't matter how long it remains in their possession or how often it's used once the transaction is complete.

The rulers are made in a factory rather than handplained, I imagine. Where consumption is concerned, even if the ruler was broken in a fit of temper before it could be used, the means of production, the source of the raw materials, the labour, additional costs or obstacles are of far less importance than what the person who paid for it thinks: the taste of the pikelets and the satisfaction of having a ruler that fits in the pencil case and comes in handy sitting an exam.

Those producing something for a market know there is a consumer. If the ruler stays in the shop then we have no consumption. The retailer is a second buyer, given that there would be a manufacturer buying the wood and the ink, and they are acutely aware of how often rulers go marching out the door - having been paid for.

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