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Inferior goods and the lump of consumption fallacy

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Monday, Apr 28, 2008

In my local grocery store the other day, I was flabbergasted to find that it was stocking no generic brand breakfast cereals among the Fruit Loops and Special K and whatnot. Sure, it was a city grocery store and space is at a premium, but this still seemed odd. I didn’t crack and pay the extra money for the branded product; I have been years without cereal and nothing but whim (and soy milk left over from a cooking project) was prompting me to move to end that embargo. And the brand is adding especially little to my enjoyment of cereal—I never could taste any difference, and I wasn’t going to score any style points with anyone or in my own imagination for eating Kelogg’s instead of Jewel-T. I didn’t expect my cereal brand to project any sort of message to anyone or to myself. I just wanted it to be cheap or else I was going to forgo. However, cheap is a relative thing—the absence of generics made me assume that all the cereals were overpriced, though someone else might draw the opposite conclusion.


As someone who enjoys the illusion of saving for its own sake, I always look for off-brand goods, and the unanticipated absence of generic cereals made me wonder if I was hallucinating or having false memories when remembering having bought unbranded Corn Flakes in the past. It never occurred to me that generic products at the supermarket come and go with economic conditions, as this post at Calculated Risk details. CR links to a NYT story about the recession driving consumers to come up with “creative ways” to save money on shopping: Apparently these crafty innovators are starting “to switch from name brands to cheaper alternatives, to eat in instead of dining out and to fly at unusual hours to shave dollars off airfares.” How very ingenious. I wonder how these consumers came up with these radical ideas!


The underlying assumption is that consumers only think to cut back on branded goods when they can’t afford them—that generics are what economists call inferior goods, demand for which rises as income falls. They are “inferior” because they are not the preferred option but the substitute for when the preferred option becomes prohibitively expensive. Grocery stores respond the shift in demand—or rather to the downward shift of the trigger point at which people will buy—and stock more off-brand goods, protecting their volume of sales, which are of crucial importance to their low-margin business. It’s a little disorienting to realize that they don’t automatically supply cheaper options until necessity forces them to, that is, consumers don’t ordinarily demand the cheapest options and grocers get away with stocking only expensive goods. Why they do this is probably a matter of positioning themselves in the marketplace—too many generics out of season and you risk being mistaken for Aldi.


But there is something significant though in the impulse that drives the NYT business reporters to call this sort of switching between goods “creative.” Such a rhetorical move makes it seem as though there is a huge mental leap necessary to abandon brands, when in fact it seems more natural to assume generally that a huge intellectual jump is necessary to believe that there is value in brands, that they bring enough added value to leave in their wake a category of inferior goods—generics. In other words, we default to branded products, a stance that we must learn through ideology, through subtle cues that branded goods are “normal” and the unlabeled products are suspect, inferior. Thanks to how well I’ve absorbed that ideology, I can feel rebellious and subversive when I shop generic—and keep on shopping, which is the essential upshot of the NYT piece: Consumption continues despite the diminishing consumer confidence as the recession takes hold and people grow more and more economically insecure. That people might consume less, not just in dollar terms but in terms of time spent shopping isn’t directly considered, and is hinted at though it were some insane option, rather than a typical choice made at the margin. This may be a semantic conundrum; I have a hard time getting it through my head how broad and flexible a concept consumption is for economists, and that it is different from consumerism, which is the orientation of society toward maximizing consumption for its own sake. Still, I wonder if this indicates some lump-of-consumption fallacy—that there is always some raw amount of consumption determined by the size of a population, and all that varies is the value in dollar terms assigned to it—being promulgated to make us interpret the rational choice to spend less time on consumption as a crazy whim, a desperate measure.

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