The Affluent Society In his book The Affluent Society, written in 1958 and revised several times,…

The Affluent Society In his book The Affluent Society, written in 1958 and revised several times, former Harvard economics professor John Kenneth Galbraith presented a critical look at the economic situation of the United States. The following excerpt highlights Galbraith’s definition of the theory of consumer demand. The theory of consumer demand, as it is now I widely accepted is based on two broad propositions, neither of them quite explicit but both extremely important for the present value system of economists. The first is that the urgency of wants does not diminish appreciably as more

»The Affluent Society In his book The Affluent Society, written in 1958 and revised several times, former Harvard economics professor John Kenneth Galbraith presented a critical look at the economic situation of the United States. The following excerpt highlights Galbraith’s definition of the theory of consumer demand. The theory of consumer demand, as it is now I widely accepted is based on two broad propositions, neither of them quite explicit but both extremely important for the present value system of economists. The first is that the urgency of wants does not diminish appreciably as more of them are satisfied or, to put the matter more precisely, to the extent that this happens, it is not demonstrable and not a matter of any interest to economists or for cconomic policy. When man has satisfied his phys- ical needs, then psychologically grounded desires take over. These can never be satisfied or, in any case, no progress can be proved. The concept of satiation has very little standing in economics. It is held to be neither useful nor scientific to speculate on the comparative cravings of the stomach and the mind. The second proposition is that wants origi- nate in the personality of the consumer or, in any case, that they are given data for the economist. The latter’s task is merely to seek their satisfaction. He has no need to inquire how these wants are formed. His function is sufficiently fulfilled by maximizing the goods that supply the wants…. The notion that wants do not become less urgent the more amply the individual is supplied is broadly repugnant to common sense. It is some- thing to be believed only by those who wish to believe. Yet the conventional wisdom must be tack- led on its own terrain, Intertemporal comparisons of an individual’s state of mind do rest on techni- cally vulnerable ground. Who can say for sure that the deprivation which afflicts him with hunger is more painful than the deprivation which afflicts him with envy of his neighbor’s new car?… And emulation (imitation) has always played a considerable role in the views of other economists of want creation. One man’s consump- tion becomes his neighbor’s wish. This already means that the process by which wants are satisfied is also the process by which wants are created. The more wants that are satisfied, the more new ones are born…. The even more direct link between produc- tion and wants is provided by the institutions of modern advertising and salesmanship. These can- not be reconciled with the notion of independently determined desires, for their central function is to create desires to bring into being wants that pre- viously did not exist… But such integration means recognizing that wants are dependent on production. It accords to the producer the function both of making the goods and of making the desires for them. It recognizes that production, not only passively through emulation, but actively through advertising and related activities, creates the wants it seeks to satisfy. THINKING CRITICALLY 1. Explain Galbraith’s two assumptions about the theory of consumer demand. 2. How do producers create consumer demand? 3. Explain the relationship between emulation, wants, and consumer demand. Provide an example in which you have proven this theory to be true.

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