What is Consumption?
Since external factors are a huge contribution to the overall subjective well being of people, a closer look at how levels of consumption and happiness are related will be reviewed. With the amount of advertising and marketing strategies, it is hard to ignore giving into trends and new products as they subconsciously advertise that these new, shiny toys will make us happier. We are constantly bombarded with messages from advertisers and marketers, all pushing us to buy into the latest products.
Gathering from several definitions of consumption:
According to the Oxford Dictionary of Economics, consumption is defined as the “spending for survival or enjoyment, as opposed to providing for future production (Proschle).”
According to Economist Dutt, consumption is the “driving force of the economy, providing people with the incentive to expend their time and energy to obtain more and better things (Proschle).”
Lastly, according to Economist Professor Paul Ekines, he saw consumption as the aspiration of human beings to “possess and use an increased number of goods and services, in order to be happy and successful (Proschle).”
Gathering from several definitions of consumption:
According to the Oxford Dictionary of Economics, consumption is defined as the “spending for survival or enjoyment, as opposed to providing for future production (Proschle).”
According to Economist Dutt, consumption is the “driving force of the economy, providing people with the incentive to expend their time and energy to obtain more and better things (Proschle).”
Lastly, according to Economist Professor Paul Ekines, he saw consumption as the aspiration of human beings to “possess and use an increased number of goods and services, in order to be happy and successful (Proschle).”
Thus, we are then left with the age, old question, “Does money buy happiness?” In theory, it should be that people with higher income levels are happier than those with lower incomes since they are an abundance of wealth to spend at their own leisure. It is believed that people with higher incomes tend to spend more, so they have a tendency to consume more. An increased consumption of goods may increase well ebing by reducing hardships, thus making life easier, in which enhances happiness. For example, the purchase of a washing machine can help cut down on time spend on laundry, so more time and spending can be spent on food, housing, etc. Secondly, consumption of certain goods may increase happiness as it increases one’s social status as the use of clothes, jewelry, automobiles, are items of status goods. However through analyses, it is suggested that there is no significant correlation between subjective well being and income levels. The differences of the income of individuals explain less of one’s overall well being, while the differences of a range of other factors such as employment, relationships, health, etc. contribute more to one’s happiness.
According to the chart below [5], taken from Material goods, money, and financial situations explain only a low percentage of people’s happiness as it explains only 7%. Meanwhile, partner and family relationships explain a contrasting 47% of one’s happiness. Thus, external factors excluding money have a larger contribution to one’s overall happiness.
One explanation of the graph with the mentioned statistics is that once our basic needs are met, our levels of consumption do not transform into higher levels of happiness since having more of something usually provides less satisfaction [5]. People like to compare themselves to others who are wealthier and have more which leads to a continuous cycle of dissatisfaction, as people are more susceptible to wanting a better materialistic life standard. Think about it this way, happiness relates less to having than to being.
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Why Doesn't Consumption Contribute to Happiness?
So if money does not correlate to happiness, then what type of consumption does have an effect on happiness? Before we jump into it, it is essential to talk about Maslow’s Hierarchy of Needs as it will help to understand how consumption affects happiness. Maslow theorized that humans’ needs are organized into five levels: physiological, safety, love/ belonging, esteem, and self- actualization. Once the previous levels of needs are satisfied, a new set of higher needs emerge. The first four needs are described as deficiency needs (D- Needs) in which gratification comes from the “world outside the person, not from within ("Standard of Living and Happiness").” The last level of needs are B- Needs, in which they are needs related to the purpose of fulfilling our potential in life; as Maslow would describe these needs as “what a man can be, he must be” to be ultimately happy (Proschle). Each level can bring about a certain sense of happiness, but the end goal is self- actualization, the last level of the pyramid. However, starting at the bottom, if one is provided with food and water, then they are joyous to be able to satisfy their hunger and thirst. Once those needs are met, they can move up the pyramid as they focus on satisfying the other needs and so on. Few are able to reach the last level of the pyramid due to being distracted by their own consumption levels. For example, someone may be stuck in the level of safety for a while because they are more focused on having a bigger, extravagant house than a normal house. Instead of settling for a normal house, and refocusing that energy to cultivating his/ her relationships with love and care, they are unable to move up as they are clouded by their own consumption of material goods.
But Do Other Forms of Consumption Have an Affect on Happiness?
Perhaps consuming material goods does not increase happiness, but consuming in other actions may help increase happiness. In Thomas DeLeire's paper, a longitudinal study done by the Health and Retirement Study (HRS) that started back in 1992, the survey details participants on their lifestyle: employment, income, health, family structure, wealth, etc. In 2006, HRS added new modules that recorded the respondents’ life satisfaction and well being. Subjective well being, or happiness, was measured using a life scale. Within the life scale, there is a 5 component measure administered in a psychological questionnaire. The respondents were asked to rate how much they agree or disagree with following statements: “In most ways my life is close to ideal,” “The conditions of my life are excellent,” “I am satisfied with my life,” “So far, I have gotten the important things I want in life,” and “If I could live my life again, I would change almost nothing.” As part of the questionnaire, the following psychological factors were measured:
1. Depressive symptoms- using the Center for Epidemiologic Studies Depression Scale of 20 items of symptoms
2. Loneliness- Respondents were asked to answer the following questions: “How often do you feel you lack companionship?” “How often do you feel left out?” “how often do you feel isolated form others?” Then an index was constructed from the averages of the three measures.
3. Social Interaction- measured the degree of engaged activity in social networks (clubs, groups, etc.)
Also, the study examined consumption spending in 9 different categories. The following categories are:
1. Leisure- trips/ vacations, movies, sports events, performing arts, hobbies, and leisure equipment.
2. Durables- household appliances, computers, tvs
3. Charity & Gifts- contributions to religious, political, educational, and charitable organizations, cash or gifts to friends and family outside the household
4. Personal Care & Clothing- housekeeping supplies, laundry services, gardening an yard services, clothing and apparel, and personal care products and services.
5. Health Care- health care services, prescription and non- prescription medications, medical supplies, and health insurance
6. Food In- food and drinks purchased in grocery stores
7. Food Out- dining out/ drinking in restaurants, cafes, diners, and take out food
8. Utilities & Housing- mortgage, rent, electricity, water, heating fuel, telephone, cable, internet, homeowner’s/ renter’s insurance, home repairs and maintenance, household furnishing and equipment
9. Vehicles- vehicle purchases, vehicle insurance, vehicle maintenance, car payments
Chart of results below:
1. Depressive symptoms- using the Center for Epidemiologic Studies Depression Scale of 20 items of symptoms
2. Loneliness- Respondents were asked to answer the following questions: “How often do you feel you lack companionship?” “How often do you feel left out?” “how often do you feel isolated form others?” Then an index was constructed from the averages of the three measures.
3. Social Interaction- measured the degree of engaged activity in social networks (clubs, groups, etc.)
Also, the study examined consumption spending in 9 different categories. The following categories are:
1. Leisure- trips/ vacations, movies, sports events, performing arts, hobbies, and leisure equipment.
2. Durables- household appliances, computers, tvs
3. Charity & Gifts- contributions to religious, political, educational, and charitable organizations, cash or gifts to friends and family outside the household
4. Personal Care & Clothing- housekeeping supplies, laundry services, gardening an yard services, clothing and apparel, and personal care products and services.
5. Health Care- health care services, prescription and non- prescription medications, medical supplies, and health insurance
6. Food In- food and drinks purchased in grocery stores
7. Food Out- dining out/ drinking in restaurants, cafes, diners, and take out food
8. Utilities & Housing- mortgage, rent, electricity, water, heating fuel, telephone, cable, internet, homeowner’s/ renter’s insurance, home repairs and maintenance, household furnishing and equipment
9. Vehicles- vehicle purchases, vehicle insurance, vehicle maintenance, car payments
Chart of results below:
From the findings, the results showed that not all forms of consumption lead to happiness. Only one category of consumption, leisure spending, had significance on happiness. In particular, a $10,000 increase in spending on leisure goods was associated with a 0.17+ increase in life satisfaction. None of the other components of consumption were significantly associated with life satisfaction with the exception of charity and gifts, in which had a very small significant association with happiness. Firstly, a $10,000 increase in leisure spending is associated with a 14% of a standard deviation increase in happiness. Interestingly, a $20,000 increase in leisure spending is roughly equal to the boost in happiness one gets from being married. Secondly, the findings show that leisure spending has a social component (DeLeire). The correlation of increase happiness from leisure spending is affected through its social effect- reducing loneliness and increasing engaged activities in social networks. Overall, only one component is positively related to happiness- leisure consumption. In contrast, all other components of consumption appear to be unrelated to happiness. Also, leisure consumption does in fact increase happiness through its association with social connectedness, which were measured by the variables of depression, loneliness, and engaged activity in social networks.