A THEORY OF CONSUMPTION BY HAZEL KYRK, PH.D. BOSTON AND NEW YORK HOUGHTON MIFFLIN COMPANY The Riverside Press Cambridge COPYRIGHT, 1933, BY HART, SCBAFFNKB AND MASS ALL EIGHTS RESERVED INCLUDING THE RIGHT TO REPRODUCE THIS BOOK OR PARTS THEREOF IN ANY FORM Vtt Wbtnte Jfextt CAMBRIDGE . MASSACHUSETTS PRINTED IN THE U.S.A. PREFACE THIS series of books owes its existence to the generosity of Messrs. Hart, Schaffner & Marx, of Chicago, who have shown a special interest in trying to draw the attention of American youth to the study of economic and commercial subjects. For this purpose they have delegated to the un­ dersigned committee the task of selecting or approving of topics, making announcements, and awarding prizes an­ nually for those who wish to compete. For the year 1921 there were offered: In Class A, which included any American without re­ striction, a first prize of $1000, and a second prize of $500. In Class B, which included any who were at the time undergraduates of an American college, a first prize of $300, and a second prize of $200. Any essay submitted in Class B, if deemed of sufficient merit, could receive a prize in Class A. The present volume, submitted in Class A, was awarded the first prize. J. LAURENCE LATJGHLEN, Chairman University of Chicago J. B. CliAfiK Columbia University EDWIN F. GAT N.Y. Evening Post THEODORE E. BUBTON Washington, D.C. WESLEY C. MITCHELL Columbia University PREFACE THIS book undertakes to present just what its title says — a theory of consumption. The discussion found in it should be regarded as tentative rather than final, and as frag­ mentary rather than comprehensive. It is not expected that the reader will find here an analysis that is completely satisfying, merely one that may be suggestive. There are two reasons, at least, why this is inevitably true. The subject is one, it is believed, that to an unusual degree widens as the investigation proceeds. At any rate, the time and labor that have been spent in formulating this theory of consumption have continually opened up new lines of thought and suggested new questions. I brought my study to an end with more unexplored territory in sight than I was aware of in the beginning. But there is a reason, other than the breadth of the subject, why the present discussion can be only tentative and groping. A study of consumption is in the main a study of human behavior. Students of any phase of this subject to-day find that much of the discussion available is superficial, that methods of procedure are in doubt, and that knowl­ edge is uncertain. It is to be expected that, as research in this field goes on, as principles are established, and as terminology is made definite, the old interpretations of human conduct must be recast and new ones formulated. There will be found in this book no list of works consulted by the author or of general books upon the same subject. The omission is deliberate and significant. It indicates what the student of consumption may expect to find in the way of resources ready at hand for his assistance. So little has been written on the general topic that one could scarcely make a list of half a dozen titles without including works viii PREFACE more properly catalogued under other headings. If a list should be made of all the books consulted in the prepara­ tion of this essay, it would be of a character so heteroge­ neous as to astonish the reader, and, if he referred to the works himself, he might be unable to discover in what way they had contributed to the discussion. The investigator in this field, it is believed, must seek for light wherever his own ingenuity can suggest a source. In spite of what has just been said, my debt to the writ­ ings of others is as deep as if the whole of my study were a compilation from documentary material. This obligation I desire to acknowledge fully, but I find it difficult to give proper credit to all those to whom credit is due. The at­ tempt has been made to give full credit in the footnotes for all direct uses of the words or ideas of others. Yet I am aware that I gleaned far and wide in the construction of my thesis and that the acknowledgment of the aid received is often inadequate. In some cases it Is difficult to make adequate acknowledgment because the thought has been wrenched from its context, and perhaps given an applica­ tion far from its author's mind. It scarcely seemed fair to cite him as the responsible authority in such a case. In other cases a whole work has influenced the thought and shaped the treatment of a theme, but in spite of that fact it cannot be cited as the source of any particular paragraph or sentence. Although it is difficult for me to record properly my in­ debtedness to the writings of others, it is not so in the case of the persons who have been of assistance. My obligation here is clear and definite. I was so fortunate as to have my original manuscript read by Professor James Alfred Field of the University of Chicago, and, after its inclusion in re­ vised form in the Hart, Schaffner and Marx series, to have it prepared for the press under the editorial supervision of Professor James Maurice Clark of the same institution. My interest in the subject of standards of consumption was PREFACE ix first aroused when a student of the former, and his lec­ tures were the nucleus of my later thinking. I am deeply indebted to both for many valuable suggestions concern­ ing form and diction. I wish also to express my gratitude to my friend Miss Leona Margaret Powell, now of the Bureau of Industrial Relations of the United Typothetae of America, for her constant and intelligent interest in the development of my study. From the beginning she has given her time and thought to the discussion of its problems, and has supplied a reasoned encouragement that was extremely helpful. Miss Powell and Miss Phyllis Moulton have also read the proofs of this entire work. HAZEL KYRK April. 1923. CONTENTS CHAPTER I. THE NATURE AND SCOPE OF A STUDY OF CON­ SUMPTION 1 Who is the consumer? — The popular concept of the role and problems of the consumer — The varied and partial concepts of specialized economic students —• What is consumption? — The consuming process involves choosing as well as using goods — The variety of activities and interests comprehended under the term "consumption" — A study of consumption a study of a larger problem, the control and guidance of economic activity — A part of the larger problem, the problem of choice and of valu­ ation — A part of the larger problem, the problem of human welfare as a function of wealth — Past neglect of the field of consumption by economists — Their interest in the effects of consumption upon the productivity of laborers and the volume of savings — The Marginal Utility School's treatment of con­ sumption — The inadequacy of their theory of consumption — The groups interested in a study of consumption — What does a theory of consumption involve? CHAPTER II. THE CONSUMER'S FORMAL FREEDOM OF CHOICE 28 The place of the consumer in the present economic order — The consumer exercises control through price — A price-organized society gives the consumer formal freedom of choice — The status of the consumer under other types of industrial organiza­ tion — The consumer's power of choice in war time — Individ­ ual freedom of choice versus authoritative control — The status of the consumer under socialism — Formal freedom but one step toward real freedom — Economic and social limitations upon the consumer's power to choose. CHAPTER III. THE CONSUMER'S FREEDOM OF CHOICE AND THE UNEQUAL DISTRIBUTION OF WEALTH 46 The limitation upon freedom of choice imposed by the size of the income — The distributive process adjusts the claims of in­ dividual consumers to social product — Uneven fulfillment of consuming interests and desires —• The weighting of the desires of the well-to-do — The effect of inequality in income upon the uses of productive energy, the social costs and wastes involved — The effects of pecuniary emulation upon consumption — Probable effects of an equalization of incomes upon consuming habits —• Methods of mitigating undesirable effects of inequal­ ity upon consumption — The socialization of consumption — Price control and rationing — Minimum wage legislation. CONTENTS CHAPTER IV. THE CONSUMER'S FREEDOM OP CHOICE AND THE TECHNIQUE OF PRODUCTION The consumer's freedom of choice limited by conditions of pro­ duction — Effects upon consumption of the introduction of the present technique — Expansion of standards of living made possible by increase in productive powers — The present range of choice compared with that of earlier times — General ap­ proval of the present material abundance — The quality of machine-made goods — Can they be beautiful? — The uni­ formity of large scale products — The field for mechanical methods of production — The emergence of a problem of con- gumption distinct from production — The result of the inter­ position of expenditure and the use of money — The consum­ er's range of choice limited by the adequacy of market agencies and methods — Changes in the place and conditions under which consumption takes place. CHAPTER V. THE CONSUMER'S FREEDOM OF CHOICE AND THE PRODUCER'S QUEST FOR PROFITS The consumer's difficulties in a profit regime — The socialistic charge that the profit motive is a hindrance to all good work, responsible for " rubbish" making — The desire for profit in­ duces producers to seek control over demand — Producers' control over demand analogous to their control over price — The consumer's range of choice expanded by the competition of profit seeking producers — The producer's control over style — The desire for profit leads to substitution, adulteration, deceit and fraud — Difficulty of drawing the line between legitimate and illegitimate activities of producers — Aggravation of diffi­ culties by weakness and ignorance of the consumers — The vagueness and inexactness of consumers' standards — The lack of objective tests of quality — The consumer's ignorance of those that do exist, and other disadvantages of the small scale purchaser — State action in the interest of the consumer, and its necessary limitations.