Wants, needs and production

What is a ‘want’ and what is a ‘need’? Do these things change over time and how do we provide for them? These are the issues being considered by Pablo at Kiwipolitico in a fashion that may confuse many economists. He says:

The current phase of globalised capitalism brought with it the uncoupling of production from consumption even as the “wants into needs” syndrome persists. The specific result is that, relatively speaking, global production of goods has declined while the consumption of non-productive commodities has increased. That means that there is an excess of wants with respect to needs. In fact, mass focus on obtaining a proliferation of wants has served to obscure the basics of needs.

When I read that I had no idea what it meant and I think that is because of some definitional problems. First, what are ‘wants’ and ‘needs’? To an economist the distinction is fairly meaningless because there are only ‘things that people want to varying degrees’. Of course, there are trade-offs that one must make — I can’t buy a car and a bicycle with the same $5,000 — but the things we want are not inherently different and the degree to which we want them differs between individuals.

So, when Pablo talks of ‘wants’ being converted to ‘needs’, what does he really mean? What I think he means is that, as technology advances, our incomes rise and the relative cost of purchasing complex goods drops. Consequently, more people buy them and they become ubiquitous. You don’t need the nature of goods to change for that to happen. You don’t even need peoples’ preferences to change — although that may have happened, too — for smartphones to be in every pocket, either. It is enough that the cost of manufacturing has dropped and our incomes have risen due to technological progress.

What of his contention that these smartphones are ‘unproductive consumption’? I’m a bit baffled by that because it suggests that everything we purchase should be useful for producing something else. As if enjoying our purchases were not enough in itself. Either he is suggesting he knows better than we do about what makes us happy or, more likely, I am reading too much into a poetic flourish!

Finally, he suggests that there has been a ‘decoupling of production from consumption’, which is probably the most confusing statement of all. All production is consumption – as it is either consumption now, or it is investment which translates into consumption in the future. There can be no sustained difference between production and consumption in modern, market-based economies.

Rather than railing against the way he perceives society to be, it would be helpful for Pablo to refine the problems he sees and ask why things are the way they are. Once we understand the problems we can ask whether there has been a systematic misallocation of resources that has caused these problems. At the moment it appears that these issues are being clouded by some confusion over what wants, needs, production and consumption really are.