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Tackling Keynes’ question: a look back on 15 years of Learning To Consume

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Abstract

Two centuries of continuous economic growth since the industrial revolution have fundamentally transformed consumer lifestyles. Here Keynes raised an important question: will consumption always continue to expand in the same manner as it has in the previous two centuries? If so, how? This paper critically reviews a body of work that has adopted the Learning To Consume (LTC) approach to study the long run growth of consumption (Witt 2001). By borrowing certain established insights from psychology and biology about how consumers learn and what motivates them to consume, it highlights how rising income, new technologies and market competition have combined to trigger important changes in both the underlying set of needs possessed by consumers and how they learn to satisfy these needs. Methodological issues and open questions are discussed.

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Notes

  1. The view that needs are dynamic and heterogeneous across a population of consumers also distinguishes this approach from other needs approaches found in the social sciences (i.e. Maslow 1943; Max-Neef 1991).

  2. Note that it is assumed that each need precisely corresponds to one expenditure category. Thus j is not present in the formula, since i = j.

  3. These learning modes coexist because the enlargement of human brain capacity did not evolve in a way in which there was a smooth substitution of more advanced learning mechanisms for more primitive ones (Flinn 1997:33, Sartorius 2003). Rather, development was sticky: more advanced mechanisms emerged to complement older mechanisms. This presence of two learning systems is also recognized in dual process theory (Gigerenzer et al. 1999; Kahneman 2003).

  4. Several other scholars have noted the important role that critical thresholds in the consumer’s demand for certain characteristics play in industry evolution (Lancaster 1971; Adner and Levinthal 2001; Windrum 2005).

  5. In addition, note that making inferences about individual behaviour from such Engel curves assumes that the aggregation process does not substantially influence the shape of Engel curves. Many other factors may influence the shape of Engel curves, such as how consumers change the manner in which they learn from their peers as they become more affluent (Cordes 2009).

  6. Elsewhere, the acquisition of preferences is also shaped by families and the socialization process (Volland 2013) and the availability of (non-working) time (Chai et al. 2015).

  7. The key to progress on this issue is to recognize that different modes of behavior coexist (e.g. Hayek 1960; Gigerenzer et al. 1999; Witt 2001; Kahneman 2003) and to identify how agents may transition between modes and the different circumstances in which these modes tend to dominate (Brenner 1999; Lades 2014).

  8. This also has implications for welfare economics (see Sartorius 2003; Binder 2010; Schubert 2012).

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Acknowledgments

The author would like to thank John Foster, Wolfhard Kaus, Alessio Moneta, Ulrich Witt, Leo Lades and the two anonymous referees for their comments. This work also benefit from ongoing discussions with Alex Frenzel Baudisch, Corinna Manig, Julia Sophie Wörsdorfer, Stefan Bruns, Ben Volland, Thomas Brenner, Christian Cordes, Jason Potts, Wilhelm Ruprecht, Christian Schubert, Guido Bünstorf, Martin Binder, Tom Broekel, John Foster and Stan Metcalfe. An earlier version of this papers was presented at the 15th International Schumpeter Society in Jena, Germany, 2014. The author thanks the participants for their comments. This research was supported by the Griffith Business School. The usual disclaimer applies.

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    Andreas Chai

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Chai, A. Tackling Keynes’ question: a look back on 15 years of Learning To Consume. J Evol Econ 27, 251–271 (2017). https://doi.org/10.1007/s00191-016-0455-7

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