The Cambridge Economic History of Modern Britain

INTRODUCTION

Affluence can be defined as a shift between different states, both personal and collective, a rising flow of cheaper goods and experiences, of novelty and obsolescence, as new satisfactions are discovered, and old ones are discarded. Experiences disseminate as a sequence of S-shaped curves, just a few of them at the outset, and then more frequent, affecting only small numbers slowly, rising faster to an inflection point, then slowing down and flattening out when novelty is exhausted and everyone is included (Scitovsky 1992). Likewise, in orthodox microeconomic consumption theory, wants become less compelling the more they are satisfied, so people shift their preferences sequentially to more pressing ones. But Want in general is insatiable, and the craving continues.

So far, modern affluence in the UK has largely followed these patterns. In the course of the twentieth century, the luxuries of the rich have become necessities for all. The movement has been from getting to spending, from work to leisure, from toil to comfort, from privies to bathrooms, from coal fires to central heating. The experience of affluence extended primarily to the top fifth of the population between the wars, and to the rest only from the 1950s onwards. An inflection point appears to have been reached in the 1970s, and affluence may now be levelling off, we know not for how long.

Income and spending are intermediate: the ultimate pay-offs are emotional, the ultimate purpose is well-being. In contrast, the microeconomic approach to wellbeing is to measure consumption expenditures (Olney 1991). In a rough and ready way, this is fine. At the bottom of the ladder of needs, in the quest for food and shelter, consumption expenditure is a good proxy for utility. But as satisfactions multiply, expenditure is no longer such a good measure of well-being. The focus on expenditure also implies that choice equals welfare. Now, the excitement and anticipation of choice can be good in themselves, but form only a small part of well-being.