This blog is a light-hearted look at the week’s events
“The things you own end up owning you.”
Tyler Durden, in the film ‘Fight Club’
Much has been written, and continues to be written, about the decline of bricks-and-mortar retail spaces – shopping malls etc. – in favour of online retail outlets such as Amazon (see for example an article in the Wall Street Journal). But underneath that shift, which is undoubtedly real, perhaps there’s another shift, away from the consumption of material things in general, and towards the consumption of experiences.
Away from the tangible towards the intangible.
The sentiment expressed in the quote from Tyler Durden captures a recent phenomenon, something typically associated with so-called Generation X, or with the millennials that came afterwards. It springs, I think, first from a feeling of satiation with ‘things’: a feeling that the middle classes in advanced economies have sufficient things, and perhaps too many. That satiation then breeds a feeling of disgust or nausea, captured perfectly in Chuck Palahniuk’s book and the subsequent film. It’s not clear to me whether the character Durden advocates spending any surplus income on experiences rather than on things, or whether his advice is to refrain from consumption altogether, as far as possible – probably the latter. But it’s things that own us, according to him, not experiences, and (hopefully without giving away any spoilers), there does seem to be a fair amount of money spent on ‘experiences’ of one kind or another by Tyler Durden in his story.
This thought is not new. Various religious and indeed irreligious texts over the centuries have emphasised the primacy of the spiritual or immaterial aspects of life relative to material wellbeing: “For what shall it profit it a man…” and all that. Another kind of shift towards the intangible.
In economics, there’s a branch of utility theory that addresses it obliquely. Lifetime utility, or welfare, is traditionally thought by economists to increase monotonically with lifetime consumption (with various provisos about the distribution of consumption over time). But perhaps that relationship only holds up to a point – the ‘bliss point’, as it’s known in the literature. Perhaps, beyond that point, the marginal utility of additional consumption (the bang for the next buck you spend, so to speak) is zero, or even negative. There’s no distinction here between consumption of things or of experiences – excessive consumption in general is the theme.
Then there’s the empirical finding, clearly defined across all advanced economies, which Danny Quah wrote about memorably in his ‘The Weightless Economy in Economic Development’, noting the shift away from (heavy) manufactured goods towards services (which weigh nothing). That shift has been in train in advanced economies for decades.
Economists love caveats, so here are some. We should note that one person’s bliss point (if it exists at all) might be regarded as barely adequate consumption by another. And we should also be conscious that the idea of such a bliss point has only a very narrow application, to those in the top income brackets globally (equivalent to above-average incomes in advanced economies). Likewise, the shift away from manufacturing is not a feature of most developing or less-developed economies. And some would say that the conflation of the concept of ‘bliss’ with that of material wellbeing is the whole problem with economics and economists.
So this is not everywhere and for all people. But is it real anywhere, or for anyone? The data suggest not.
What would the world look like if it were true?
If additional consumption of any kind were genuinely utility-decreasing, then people would either save a higher proportion of their income (though for what?) or spend less time working. But savings ratios in advanced economies are at or close to all-time lows, while labour force participation is rising or stable in most advanced economies, once the normal impact of demographic shifts has been accounted for.
If consumption of things were generally perceived as nauseating, then people would reduce their consumption of things and increase their consumption of experiences. Certainly, the share of spending in advanced economies that goes on things has fallen for a long time, and continues to do so. But the principal reason for this is that the price of things has fallen relative to the price of experiences, and continues to do so.
The quantity of things consumed per person is increasing along a broadly log-linear trend. It seems that we have not yet reached our bliss point for the consumption of things, at least not in aggregate.
Wait, though: it’s millennials we’re talking about! Not oldies like this author. Surely there’s a different attitude among the young!
There’s precious little evidence of that in the data, though the data are patchy in this respect. In the UK, the share of spending that goes on ‘recreation and culture’, for example, increases with age up to the age of 75, even if we take the cost of housing (disproportionately high for the young) out of the equation. And the share of spending on food & drink, clothing and footwear, and household goods and services (things like the Ikea products that attract particular scorn in ‘Fight Club’) is broadly flat across the age groups up to 75, once the costs of housing are removed. Perhaps millennials are not so different from the rest of us, after all.
Fathom’s contribution to this field is a straw poll of colleagues, friends and family, asking the question: if I were to give you £1,000, what would you do with it? Save it; spend it on something tangible; or spend it on something intangible (choosing just one option)? The results are interesting. 28% would save the money: 28% would spend it on things; and 45% would spend it on experiences. The mean age of those who would save was 36; of those who would buy things, 46; of those who would buy experiences, 33. And the ages of those who would buy experiences were significantly more tightly clustered around the mean than in either of the other two categories.
There was some push back on the poll from older participants who said ideally they would give the money away, not one of the options offered. The economics of altruism is another field entirely.
The Fathom ‘set’ includes a large proportion who are around 33 years old and who would spend a windfall on experiences – 63% more than would spend it on things. Of course the sample is far too small to permit valid inferences to be drawn regarding the whole population. But perhaps we can tentatively conclude that the Fathom set is more attuned to the millennial mentality captured in ‘Fight Club’ than the general population?
Perhaps. But we don’t talk about that.