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Consumer economy
A consumer economy describes an economy driven by consumer spending as a high percent of its gross domestic product (GDP), as opposed to other major components of GDP (gross private domestic investment, government spending, and imports netted against exports).
In the U.S., it is usually said by economists, including in Henry Hazlitt's "Economics in One Lesson" that 70% of spending is consumer-based, but this number is disputed by economists like Businessweek columnist Michael Mandel.
The absolute income hypothesis argues that income and demand generate consumption, and that the rise in GDP gives life to a rise in consumption. It was popularized by Keynes. Milton Friedman argues for a permanent income hypothesis, that consumption spending is a function of how rich you are.
Absolute income was theorized by Keynes. Its model is Ct=λYt. He believed that consumption at a certain time could be determined by marginal propensity to consume multiplied by income at that particular time.
Permanent income was theorized by Friedman. Instead of marginal propensity to consume, it theorizes "consumption smoothing", where people spread out changes in income using borrowing (e.g., credit cards).
Charles Hugh Smith, writing for Business Insider, argues that while the use of credit has positive features in low amounts, but that the consumer economy and its expansion of credit produces consumer ennui because there is a marginal return to consumption, and that hyperinflation experts recommended investment in tangible goods. Smith raises the issues of storage and maintenance of goods as limitations and problems of the consumer economy, as demand will eventually have to stagnate and credit will one day be denied.
Many capitalist countries have an economy that is driven by the economic activities of its constituents. England and America have particularly influential economies.
The consumer revolution in England is generally understood to have been in the eighteenth century, although the concept of consumerism was perceived to have appeared in the late 1500s and 1600s. Prior to this, the Middle Ages were understood to have been a time of perpetual material poverty, in which the concept of the commodity or the concept of the consumer did not exist. Maryanne Kowaleski argues against this view, arguing that medieval charity, instructional guidebooks, and population growth (paralleled by that of currency), created a consumer economy in the pre-Great Famine era Research by people like Britnell and Campbell suggest commercialization first appeared in the medieval period, and researchers like Christopher Woolgar have studied consumption practices in elite households.
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Consumer economy
A consumer economy describes an economy driven by consumer spending as a high percent of its gross domestic product (GDP), as opposed to other major components of GDP (gross private domestic investment, government spending, and imports netted against exports).
In the U.S., it is usually said by economists, including in Henry Hazlitt's "Economics in One Lesson" that 70% of spending is consumer-based, but this number is disputed by economists like Businessweek columnist Michael Mandel.
The absolute income hypothesis argues that income and demand generate consumption, and that the rise in GDP gives life to a rise in consumption. It was popularized by Keynes. Milton Friedman argues for a permanent income hypothesis, that consumption spending is a function of how rich you are.
Absolute income was theorized by Keynes. Its model is Ct=λYt. He believed that consumption at a certain time could be determined by marginal propensity to consume multiplied by income at that particular time.
Permanent income was theorized by Friedman. Instead of marginal propensity to consume, it theorizes "consumption smoothing", where people spread out changes in income using borrowing (e.g., credit cards).
Charles Hugh Smith, writing for Business Insider, argues that while the use of credit has positive features in low amounts, but that the consumer economy and its expansion of credit produces consumer ennui because there is a marginal return to consumption, and that hyperinflation experts recommended investment in tangible goods. Smith raises the issues of storage and maintenance of goods as limitations and problems of the consumer economy, as demand will eventually have to stagnate and credit will one day be denied.
Many capitalist countries have an economy that is driven by the economic activities of its constituents. England and America have particularly influential economies.
The consumer revolution in England is generally understood to have been in the eighteenth century, although the concept of consumerism was perceived to have appeared in the late 1500s and 1600s. Prior to this, the Middle Ages were understood to have been a time of perpetual material poverty, in which the concept of the commodity or the concept of the consumer did not exist. Maryanne Kowaleski argues against this view, arguing that medieval charity, instructional guidebooks, and population growth (paralleled by that of currency), created a consumer economy in the pre-Great Famine era Research by people like Britnell and Campbell suggest commercialization first appeared in the medieval period, and researchers like Christopher Woolgar have studied consumption practices in elite households.