Introductory economics textbooks assume consumers are sovereign in the market. The preferences of consumers are supposed to be authentic, self-generated. Consumers’ preferences are supposed to determine what producers supply. But this is an age in which producers increasingly contest that sovereignty. With powerful corporations, costly information, pervasive advertising, and persuasive salesmanship, consumers are less independent, their preferences less authentic. Created wants do not arise spontaneously from individual preferences but from advertising and salesmanship. John Kenneth Galbraith described such want creation as “the revised sequence” (Galbraith 1967, p. 212).
Of course, the traditionally accepted sequence still operates. Information about what is wanted still flows from consumers to producers, from the demand side of the product market to the supply side. Not all wants are created by producers. Sovereign consumers have not lost their power. But they do have to share it. Producers no longer respond passively to consumer whim, if they ever wholly did. The sovereignty of the consumer is being challenged on a widening front. A significant flow of information is now going in the other direction. A revised sequence has been established in which information flows from producer to consumer, from the supply side of the product market to the demand side. Supply has begun to create demand. Consumer wants have begun to depend on producer production. Galbraith coined the phrase “the dependence effect” to describe consumption that depends on production (Galbraith, 1969, p. 143).
Want creation reduces the authenticity and the urgency of consumer preferences. It undermines much of neoclassical economics. It cuts the hearts out of microeconomic and welfare theory, changes macroeconomic theory, and forces a reconsideration of the benefits of globalization. If taken seriously, want creation would revolutionize textbook economics, where it is still largely ignored.
In microeconomic theory, want creation means that the price mechanism is not the only way markets reach equilibrium. Excess supply of consumer goods may or may not be eliminated by a decline in the market price. It may also be eliminated by an increase in advertising and salesmanship and other alterations in the flow of information from producer to consumer—all intended to shift the demand curve to the right instead of moving downward along the demand curve toward a lower price and higher quantity demanded. Excess demand for consumer goods, likewise but in reverse, may or may not be eliminated by the price mechanism. That is, advertising, salesmanship, and information management may be adjusted downward, instead of price being adjusted upward, to clear the excess demand from the market. Want creation introduces indeterminacy and producer discretion into the market adjustment process (Waller and Robertson 1998).
In welfare theory, want creation destroys the presumption of market optimality. To the extent that wants are created so that producers can profit by supplying them, equilibrium in the product market does not represent optimal consumer utility in the form of consumer surplus. In fact, consumer surplus loses its meaning when consumer wants are created by producers. Furthermore, if workers supply their work in order to buy the products that meet the wants created by the producers who hire them, how can it be said that human welfare is served?
In macroeconomic theory, want creation replaces more orthodox consumption functions with the demonstration effect (Duesenberry 1949). When the desirability of new goods and services is demonstrated to consumers, short run consumption permanently shifts up to include the new item. This makes the average and marginal propensities to consume the same in the long run, even if the marginal propensity is less than the average propensity in the short run. Of course, in the United States, want creation has made the pressure to consume so intense that the marginal and average propensities are both close to unity.
When wants are created, it is questionable to what extent underdeveloped countries benefit from globalization when it opens them up to the advertising, salesmanship, and information management exercised by the powerful corporations of developed countries (Dugger 1998).
Applied to a wide range of economic doctrines, want creation is a subversive concept.
Among the economists seriously discussing want creation are Robert H. Frank, who is linking individual preferences to social emulation (Frank 1985, 1999), and Juliet B. Schor, whose work is more focused on manipulation by advertisers (Schor 1991, 1998).
SEE ALSO Consumer; Consumer Protection; Consumerism; Consumption; Functionings; Galbraith, John Kenneth; Hidden Persuaders; Needs; Relative Income Hypothesis; Subliminal Suggestion; Wants; Welfare Economics
Frank, Robert H. 1999. Luxury Fever: Why Money Fails to Satisfy in an Era of Excess. New York: Free Press.
Galbraith, John Kenneth. 1967. The New Industrial State. Boston: Houghton Mifflin.
Galbraith, John Kenneth. 1969. The Affluent Society. 2nd ed. Boston: Houghton Mifflin.
Schor, Juliet B. 1991. The Overworked American: The Unexpected Decline of Leisure. New York: Basic Books.
Schor, Juliet B. 1998. The Overspent American: Upscaling, Downshifting, and the New Consumer. New York: Basic Books.
Waller, William, and Linda Robertson. 1998. The Politics of Consumption and Desire. In Thorstein Veblen in the TwentyFirst Century, ed. Doug Brown, 28–48. Cheltenham, U.K.: Edward Elgar.
William M. Dugger