Consumer Science. How Do I Affect the Economy?

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America is such a prosperous country with great mineral and agricultural resources. It is the world’s largest producer of both electrical and nuclear energy. It leads all nations in the production of liquid natural gas, various metals, minerals and many other natural products. Its huge economical growth depends to a large extent on its natural resources, trade and manufacture. The development of the economy has also been accelerated by development of technology.

As an individual how do I impact such a huge economy? – This is an interesting question. It must be noted that the U.S. economy is composed of a broad range of industries that are characterized as either goods producing or service producing. Whether it is goods producing or service producing, success depends on the demand of the consumers. This is where I do impact the economy – in my role as a consumer.

The United States currently enjoys the “highest standard of living” in the world: more food, clothing, bathtubs, automobiles, household appliances, and toothpaste is available per consumer than in any other country; everything is bigger or better or more plentiful than elsewhere. All of these are production activities and for production to succeed there must be wise consumers. Adam Smith noted the paradox that the things which have the greatest value in use have frequently little or no value in exchange; and on the contrary, those which have the greatest value in exchange have frequently little or no value in use (Bell 38).

Nothing is more useful than water; but it will purchase scarce anything; scarce anything can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it. I must learn to spend my money so that I get maximum value and utility. I must be careful while making my buying choices. Shall I buy this article? Will the paying for it trench on my income and make me go without something that is of greater importance? Is this article or some other of equal cost the more desirable? By maximizing value and utility I can contribute to a healthier economy.

Personal consumption expenditures account for the largest share of GDP and hence consumers play a major role in the economy (Toosi 12). I understand that my decisions regarding what to buy, how much to buy, and when to buy from the myriad of goods and services that are available today determine how much of which goods and services ultimately will be produced in the nation. The production of these goods and services drives the economy and also generates employment.

Thus development of the economy originates from consumer choices and reflects the wishes of those consumers. In my role as a consumer I affect the economy in many ways. The great economist John Maynard Keynes has asserted that the Great Depression of the 1930s was largely due to decline in public confidence, which led to dramatic declines in consumer and business spending. It is very important that the consumer is confident about the economy of the nation. I must be an optimistic person because optimistic consumers tend to spend more, especially on durable goods and other large purchases – which in turn increase production and strengthen economy.

The wild spread of the consumer life-style around the world has totally changed the way people live. Over a few short generations, we have become car drivers, television watchers, mall shoppers, and throwaway buyers. This has increased pollution, harming the environment and has not helped in providing people with a fulfilling life. If I make foolish choices that harm the environment, the future of the country will be totally impoverished. The air and water will be poisoned, fertile soils will be worn down, living species will decline in number, and wild habitats will be destroyed. This will cause serious economic decline (Durning 128).

It is possible for me to curtail use of those things that are ecologically destructive, such as fossil fuels, minerals, and paper. I can cultivate nonmaterial sources of happiness such as family and social relationships, meaningful work, and leisure.

In this age of consumerism, one must also ensure there is no personal debt. We tend to spend a lot of money on luxury goods and entertainment. Consumption may help to fuel the economy in the short term, but it is saving, not spending, that provides the capital for productive investment and long-term growth. Hence, as a consumer, I must make choices that help me to save money as well. Moreover, this is the time for the retirement of the Boomer generation.

The economy needs to be made more productive. This is possible not only by increasing consumption but also by increasing savings. But if all money were to be trapped in the form of savings then there would be no growth. The GDP growth will move into negative territory. Therefore, there needs to be a delicate balance between spending and saving. As an individual, if I do that, I can contribute to the development of the economy.

I also affect the economy by participating in elections and choosing the government that decides the economic policy of the country. Government policy can stimulate the economy in the short term through one-time tax rebates, extension of unemployment benefits, investing in infrastructure and education and spending more on defense. The ideal government would be one that can run deficits during a recession and surpluses during times of prosperity.

Bibliography

Durning, T. Alan (1992). How Much Is Enough? The Consumer Society and the Future of the Earth. Norton Publishers. New York.

Bell, Shaw Carolyn (1967). Consumer Choice in the American Economy. Random House. New York.

Toosi, Mitra (2002). Consumer Spending: An Engine for U.S. Job Growth; Personal Consumption Expenditures Continue to Account for More Than 60 Percent of Total Employment in the U.S. Economy, with Consumers Increasingly Shifting Their Purchases to a Sophisticated Array of Personal Services. Monthly Labor Review. Volume: 125. Issue: 11. Page Number: 12+.

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Consumer Science. How Do I Affect the Economy?

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