Does having more stuff make us happy?
Yes, but only up to a point. Let's have look at a fascinating economic concept that concerns all of us, every day.
The more we consume things the less useful they are
The satisfaction we get when we consume a good or service (GoS) is what economists call “utility”.
Have you realized that your satisfaction is not the same as you consume more of the same stuff?
This is because your marginal utility, i.e., the satisfaction gained from consuming an additional unit of a GoS isn't the same as the first time you buy it. In fact, it generally goes down as you consume more of the same GoS.
That’s the law of diminishing marginal utility, in a nutshell.
Americans buy a pair of shoes every 50 days
Let’s take an example: shoes.
A study done in the last decade found Americans were buying 7.5 pairs of shoes/year on average, i.e. 1 pair/50 days!
So, let’s say that you buy comfortable, everyday boots to replace your old ones. Surely, this pair of shoes provides great satisfaction: you can now walk in comfortable dry shoes, instead of sticking to your old ones that had a hole in the sole.
But, then hits spring and your old, perfectly functional, sandals aren’t in fashion anymore, so you buy new ones to keep up with the new trend. Then, your fav' brand releases a limited edition sneaker that you have to have in your collection. Then comes summer, which means more shoes for the holidays!
By the end of the year, you’ve purchased 7+ pair of shoes, most of them you hardly wore a couple of times when meeting friends or on your holiday.
Surely, the utility provided by your first pair of everyday boots was high: without these your feet would be wet on rainy days. However, is that also true for the other pairs you bought?
Chances are, your satisfaction was low or fleeting at best for most other pairs. So, you’ve spent a lot of money to only slightly increase your satisfaction, all without considering the environmental impact of your purchases.
How does our consumption impact the planet?
A whopping 90% of the shoes produced each year end up in landfill. Many within the first 12 months of their purchase! It is estimated that 22 billion pairs of shoes are going to landfill each year, many with damaging petrochemicals & materials that take 1000s of years to decompose.
Your pair of sneakers generates 30 pounds of CO2 emissions. From the moment of production to end of life, the sheer volume of shoes produced and consumed is harming the planet (and your wallet!)
What can you do to save money and the planet?
If need be, consider buying pre-loved pairs of shoes, or better, get your favorite pair of shoes repaired! (pro tip: if you're in the UK, you can find hundreds of second hand shops and repair shops on the Ganddee app!)
Every time you make a purchase, you are voting with your money. Choosing to purchase from sustainable venues sends strong signal to the market, and encourages companies to strive for greater sustainability.
More importantly, the example of the shoes applies to most GoS we consume! Consider your utility, your wallet and the planet before going making those impulse purchases.
As marginal utility decreases, your purchases bring less satisfaction while exacerbating the climate crisis. So, let’s stick to high utility purchases!
There is a debate around whether Gross Domestic Product (GDP) should still be used as the main indicator to track development around the world. Often, people advocating for degrowth, i.e. advocating to ditch the "GDP hegemony" and strive to maximize a set of other indicators such as human wellbeing, equality indices etc. are blamed for threatening the economy and sometimes ridiculed for willing to get back to the Stone Age.
However, it is worth taking a step back, and ask ourselves: "how is buying 20 pairs of shoes every year contributing to human development?"
When we look at the notion of "utility", we quickly get our answer: it doesn't.
Overconsumption means lots of low-utility and high-environmental impact purchases. This is a poor use of capital which begs for a rethinking of our consumption patterns.
References
🙏 Many thanks to Naina Khandelwal for co-authoring this post!
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