When I started this blog I had an idea in mind that I haven’t mentioned in any posts yet.
It has to do with something that bugs me about so much of the mindset of Americans. It goes to the heart of micro-economics as is normally taught in the economics courses of Americas colleges. That idea is the maximization of the personal utility curve solely through income maximization.
Typically when one looks at utility curves you have a simplified system of a certain number of goods. At any given income level you can purchase a certain number of each goods. As a utility maximizing consumer, you will allocate your income toward each good at the level where you derive the most overall benefit. Almost always, more of a given good provides more utility, even if only a small amount, and therefore, maximizing one’s income, allows one to increase their utility by increasing consumption. Its probably not quite as simple as I’ve stated; there are things that I’m leaving out, but when you look at the lifestyle of most of America today, that simplified framework is probably pretty close to reality.
After thinking about this for a little while I wanted to do a comparison and see if its like this everywhere because its not quite the framework that my grandparents probably would have thought of. So I went to Google and did a search for “Self sufficiency United States”. The first page of results for the first search I did gave me 10 listings that talked about self sufficiency in the energy sector, mainly it had results that talked about when can the United States achieve energy self sufficiency. (This is related to the shale energy trend that’s swept into the US in the last 10 years), but its not really what I was looking for. So I went back a few years before shale oil really hit it big. I filtered my search for results in 2010 and 2011.
Of the first 10 results, eight were related in some form or another to achieving income levels that would allow someone to live without having to rely on any subsidy from the government. To be fair, three of those results related to what is called the Self Sufficiency Standard (link), a metric that calculates a given level of income that is needed to be considered Self Sufficient. Of the remaining results, one dealt with Energy self sufficiency and one dealt with the idea of self sufficiency as a foundation for political independence of the early United States.
So 80% of the first 10 results dealt with the idea of economic self sufficiency in terms of income levels that allow you not to have to rely on an external subsidy.
So then I did a different search: “Self Sufficiency Australia”
The results for that were very different. In this search, 9 of 10 of the results dealt with the idea of actually producing for consumption by ones self in lieu of consumption of goods produced by others, i.e. how to grow your own garden or raise chickens.
There are obviously grocery stores and restaurants in Australia, and plenty of people in the U.S. have vegetable gardens. I’m sure there are supplemental a assistance programs in Australia, and not everyone in U.S. is on welfare. This wasn’t a scientific survey, just a way to get a taste of mindset in order to draw a comparison.
Gives and Takes
There are pros and cons for both ways of looking at consumption.
In the American version, you earn your income doing whatever it is that you do for a job, and you spend that income on whatever you need or want. Whatever it is that you’re consuming goes through several levels of processing before it gets to you. For example, for a loaf of bread, first wheat must be grown and dried. Then its sold to a mill that turns it into flour. Fromt here it goes to a baker, which puts it together with some other ingredients and turns it into a loaf of bread, which is then sold to a store. Some of those steps are combined under one roof, but that’s the idea. There is a level of specialization that goes along with each step. You save time and aggravation by not having to do the work to grow the wheat, to mill the wheat, and to make the bread. You probably sacrifice money.
In the “Australian” version, you do it from start to finish. You grow the wheat, mill it, mix it and bake the bread. You have to acquire the expertise to do all of those processes. In the American version, you pay someone else for their expertise, and you implicitly agree to their decisions for all steps in their processes, even if you don’t know what they are. In the Australian version, you have to make the decisions that you might not have realized even existed.
Obviously not everyone in Australia is baking their own bread, and not everyone in the U.S. has turned their ovens into extra storage space for old electronic equipment. There’s a mix between people and even for a given person.
The personal utility curves that people are evaluating depend on a number of factors including income levels, time, skills, knowledge and alternatives.
Well, that was dry, so I will try to make this a bit more fun in the next few posts.
it might start out slow, but bare with me, and please feel free to leave some comments.
Somehow I have a few people following this blog (which is new for blogs I’ve done) and I feel compelled to write, if only for them, even if they’re located in mid-atlantic coastal areas, ahem, ;-o