Skip to main content

Advertisement

SpringerLink
Log in

Black-White Differences in Consumption: An Update and Some Policy Implications

  • Published:
The Review of Black Political Economy

Abstract

Marcus Alexis, in his Ph. D. dissertation and in later published work, conducted pioneering work in the area of black-white differences in consumption behavior and thereby influenced our understanding of household behavior and significantly impacted the field of marketing. This paper recapitulates his findings and reviews some contemporary work on black-white differences in consumption and some implications for future work on differences in consumption behavior.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. George Joyce and Norman A.P. Govoni, eds., The Black Consumer, New York: Random House, 1971, pp. 257–274.

  2. “Professor Milton Friedman has developed a theory of the consumption function which involves an implicit prediction of future income flow.” Alexis (1959a), footnote 25. While it is speculative to suggest that Friedman knew or should have known of Alexis’s work, their work was contemporaneous, focused on some of the same issues (black versus white consumption patterns), and drew upon the same data. See especially, Friedman, A Theory of the Consumption Function, Chapter 4 for his treatment of black-white differences in consumption.

  3. The datasets are archived at the Inter-University Consortium for Political and Social Research (ICPSR) at the University of Michigan. Taylor and Houthakker (2010) point out that studies based on the 1935–36 surveys were important for the development of Duesenberry’s relative income hypothesis, Modigliani and Brumberg’s life-cycle model, and Friedman’s permanent income hypothesis.

  4. Klein et al. (1954).

  5. Alexis (1971a), p. 76.

    His critique appears to apply to Mendershausen (1940), Brady and Friedman (1947), Duesenberry (1949), Tobin (1951), and to a lesser extent Klein and Mooney (1953) who use Survey of Consumer Finance data.

  6. Alexis (1971a), p. 65. Friend and Schor found that higher measured black saving was the result of much higher dissaving among white households.

  7. Alexis (1971a), p. 76.

  8. Alexis (1970), p.135.

  9. Op. cit.

  10. Quoted in Alexis (1959a), p. 15.

  11. Alexis defines comparability in terms of income, liquid assets, and unit size; Alexis (1959a), p. 84.

  12. Alexis (1959a), p. 87.

  13. Alexis (1959a, p. 20, citing Tide, “The Negro Market: An Appraisal,” March 7, 1947.

  14. However, Alexis is clear on the point that he believes that the most important factor was the improvement in the economic circumstances of the black community.

  15. Alexis (1959a, p. 21.

  16. Houchins, a Cornell-educated attorney, later served as Director of Compliance for the President’s Committee on Government Contracts in the Eisenhower Administration from 1954 to 1961. In 1961 he joined the economics faculty at Howard University where he served for nearly thirty years. Some credit this episode with catapulting Johnson Publications in general, and Ebony magazine in particular, to the head of the black media enterprise.

  17. Peter F. Drucker, Adventures of a Bystander, New York, 1994.

  18. Drucker, pp. 268–269. According to Drucker, “Dreystadt had found that the Cadillac was the only success symbol the affluent black could buy; he had no access to good housing; to luxury resorts; or to any other of the outward signs of worldly success”.

  19. Drucker, p. 268.

  20. “Why Negroes Buy Cadillacs,” Ebony (September 1946), p. 34.

  21. Alexis 1959a, p. 172.

  22. Alexis 1959a, p. 170.

  23. Alexis 1959a, p. 175.

  24. Charles, Hurst, and Roussanov, “Conspicuous Consumption and Race,” NBER Working Paper No. 13392, September 2007.

  25. CHR, footnote 12. Since in their analyses CHR account for no more than 90 % of consumption expenditures, their statements about how racial differences in spending relate to wealth accumulation are largely conjectural. Even in the working paper version of the paper where an extensive examination and discussion of this issue appears, the authors conclude: “We do not wish to make a strong causal claim about the results in Table 10 [showing significant racial differences in wealth after controlling for a number of factors] however it does appear that the mechanism that leads Blacks to consume more conspicuous goods than their White counterparts could also explain some of the well documented Black-White wealth gap.”CHR, 2007, p. 33.

  26. CHR do not present data on quarterly expenditure or shares for the individual components of “visible expenditures”, only the composite measure.

  27. CHR, p. 15. It is also the case that housing is one class of goods for which there is substantial information concerning characteristics or quality, so that price alone would not be an appropriate indicator of quality.

  28. Mark A. Cohen, Report on the Racial Impact of AHFC’s Finance Charge Markup Policy: In the Matter of Terry Willis, et al., v. American Honda Finance Corporation (AHFC), June 30, 2004,

    http://www.nclc.org/images/pdf/litigation/closed/ahfc-cohenreportappendices-a-c.pdf accessed 12/30/13.

  29. Department of Justice, Justice News, Office of Public Affairs, December 20, 2013,

    http://www.justice.gov/opa/pr/2013/December/13-crt-1349.html; accessed 12/30/13.

  30. Ian Ayres and Peter Siegelman, “Race and Gender Discrimination in Bargaining for a New Car.” American Economic Review, 85:3, pp. 304–321.

  31. Some critics of this method indicate that since a deal was not consummated the final outcome cannot be known with certainty.

  32. Rachel Croson, Catherine Eckel, and James Murdoch, RAPID: The Impact of Stimulus Spending on Energy Efficiency in a Low-Income Dallas Neighborhood: Implications for Science Policy. National Science Foundation #SES-0943449, 7/31/2011.

  33. Jeff Koyen, “The Truth about Hispanic Consumers,” Ad Week, March 11, 2012, http://www.adweek.com/sa-article/truch-about-hispanic-consumers-138828 .

  34. Lawrence R. Klein and H. W. Mooney, “Negro-White Savings Differentials and the Consumption Function Problem,” Econometrica., 21:3, p 430.

  35. Alexis 1959a, p. 43.

References

  • Alexis M. Racial differences in consumption and automobile ownership. Unpublished Ph. D. university of Minnesota: University of Minnesota; 1959a.

    Google Scholar 

  • Alexis M. Pathways to the negro market. J Negro Educ. 1959b;28:114–27.

    Article  Google Scholar 

  • Alexis M. The changing consumer market: 1935–1959. J Mark. 1962;26:421–46.

    Google Scholar 

  • Alexis M. Patterns of black consumption 1935–1960. J Black Stud. 1970a;1:55–74.

    Article  Google Scholar 

  • Alexis M. Review of D. Parke Gibson, the $30 billion negro. J Cons Affairs. 1970b;4:135.

  • Alexis M. Some negro-white differences in consumption. In: Joyce G, Govoni NAP, editors. The black consumer. New York: Random House; 1971a. p. 257–74.

    Google Scholar 

  • Alexis M. Wealth accumulation of black and white families: the empirical evidence: discussion. J Financ. 1971b;26:458–65.

    Google Scholar 

  • Ayres I, Siegelman P. Race and gender discrimination in bargaining for a new car. Am Econ Rev. 1995;85:304–21.

    Google Scholar 

  • Berger J, Ward M. Subtle signals and inconspicuous consumption. J Cons Res. 2010;37:555–69.

    Article  Google Scholar 

  • Brady DS, Friedman RD. Savings and the income distribution. In: Studies in income and wealth. New York: National Bureau of Economic Research; 1947. p. 247–65.

    Google Scholar 

  • Chambers J. Madison avenue and the color line: african americans in the advertising industry, (Philadelphia: University of Pennsylvania Press), 2008.

  • Charles K, Hurst E, Roussanov N. Conspicuous consumption and race. 2007. National Bureau of Economic Research. Working Paper WP No. 13392

  • Charles K, Hurst E, Roussanov N. Conspicuous consumption and race. QJEcon. 2009;124:425–67.

    Google Scholar 

  • Cohen, M.A. Report on the racial impact of AHFC’s finance charge markup policy: in the matter of Terry Willis, et al., v. American Honda Finance Corporation (AHFC), June 30, 2004, http://www.nclc.org/images/pdf/litigation/closed/ahfc-cohenreportappendices-a-c.pdf accessed 12/30/13

  • Croson R, Eckel C, Murdoch J. RAPID: the impact of stimulus spending on energy efficiency in a low-income Dallas neighborhood: implications for science policy. National Science Foundation #SES-0943449, 7/31/2011.

  • Davis JF. Realizing marketplace opportunity; early research on the black consumer market by mainstream marketers, 1930–1970. CHARM 2011 Proceedings.

  • Drucker PF. Adventures of a bystander, (Edison: transaction publishers). 1994.

    Google Scholar 

  • Duesenberry JS. Income, saving and the theory of consumer behavior. Cambridge: Harvard University Press; 1949.

    Google Scholar 

  • Ebony Magazine. Why negroes buy cadillacs. (September 1946), p. 34.

  • Friedman M. A theory of the consumption function. (Princeton: Princeton University Press), 1957.

  • Friend I, Schor S. Who saves? Rev Econ Stat. 1959;41:213–48.

    Article  Google Scholar 

  • Gibson, DC. The $30 billion negro. (New York: Macmillan), 1969.

  • Kiplinger Magazine. 14 million negro customers: business can learn to its profit that Uncle Remus is dead. April 1947; 1:4.

  • Klein LR, Katona G, Lansing JB, Morgan JN. Contributions of survey methods to economics, (New York: Columbia university press). 1954.

    Google Scholar 

  • Klein LR, Mooney HW. Negro-white savings differentials and the consumption function problem. Econometrica. 1953;21:425–56.

    Article  Google Scholar 

  • Koyen J. The truth about hispanic consumers. Ad Week, March 11, 2012. http://www.adweek.com/sa-article/truch-about-hispanic-consumers-138828.

  • McKernan S-M, Ratcliffe C, Simms M, Zhang S. Do racial disparities in private transfers help explain the racial wealth gap? New evidence from longitudinal data. Demography. 2014;51:949–74.

  • Mendershausen H. Differences in family savings between cities of different size and location, whites and negroes. Rev Econ Stat. 1940;22:122–37.

    Article  Google Scholar 

  • Tide. The negro market: an appraisal, 21 (March 7, 1947).

  • Tide. Selling the negro market, 25 (July 20, 1951).

  • Tobin J. Relative income, absolute income, and savings, in money, trade, and economic growth, in honor of John Henry Williams (New York: Macmillan Co., 1951), pp. 135–156.

  • U.S. Department of Justice. Justice news, Office of Public Affairs, December 20, 2013

  • http://www.justice.gov/opa/pr/2013/December/13-crt-1349.html. Accessed 12/30/13.

  • U.S. National Resources Committee. Consumer incomes in the United States: their distribution in 1935–1936. U. S. Government Printing Office, 1938.

  • U.S. National Resources Committee. Consumer expenditures in the United States: estimates for 1935–1936. U. S. Government Printing Office, 1939.

Download references

Acknowledgments

I am indebted to several colleagues whose suggestions helped clarify the thrust and content of this paper, including William Darity, Kaye Husbands-Fealing, Patrick Mason, Signe-Mary McKiernan, Carolyn Ratcliffe, Margaret Simms, Gene Steuerle, and an anonymous referee. Any remaining errors are solely my own.

Author information

Authors and Affiliations

  1. Department of Economics, Howard University, Washington, DC, 20059, USA

    Charles L. Betsey

Authors
  1. Charles L. Betsey
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Charles L. Betsey.

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Betsey, C.L. Black-White Differences in Consumption: An Update and Some Policy Implications. Rev Black Polit Econ 41, 259–270 (2014). https://doi.org/10.1007/s12114-014-9187-9

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s12114-014-9187-9

Keywords

Search

Navigation