New commodities and consumer behaviour

FOREWORD'There are nine and sixty ways of constructing tribal lays, And-every-single-one-of-them-is-right ! 'Rudyard Kipling, In the Neolithic AgeDuncan Ironmonger's work on new commodities was started in Cambridge over a decade ago and as one who admired it at the time I have much pleasure in writing this foreword to the now completed book. I share the author's liking for quotations and so have added one of my own choice, which, mutatis mutandis, seems to me to sum up rather neatly the state of play in the field of econometric demand studies. A survey of postwar writings on consumers' behaviour shows that there is a great variety of possible approaches to the subject, all of them useful, many of them necessary ; and it is not very difficult to see why. The econometricians of a generation ago had to contend with a number of problems which, though still with us, have become less serious with the passage of time: limitations of data; a statistical methodology largely developed in connection with the experimental sciences; and computing facilities which, by present standards, were very feeble. In these circumstances it is not surprising that econometricians should, generally speaking, have adopted a partial, static formulation based on a simplified version of the underlying theory. The linear or log-linear Engel curve, derived from family budgets, and the single equation, derived from time series, with income, relative prices and a residual trend as the independent variables, are characteristic of this period.The results of these studies were moderately encouraging : typically, income elasticities were found to be positive and of a plausible order of magnitude, the exceptions being clear instances of inferior goods; the own-price substitution elasticities were almost always negative; and the cross-elasticities suggested the presence more often of substitute than of complementary relationships. But it was usual to find significant residual trends, suggesting that changes in tastes and habits might be important factors; the demand for some commodities, in particular durable goods, could not be explained by a static formulation; and the partial nature of the analyses conflicted in some measure with the systematic theoretical framework, in which all commodities entered simultaneously. With the data available it was, and indeed still is, impossible to deal with all these problems at the same time; and so, as the prelude to a new synthesis, each problem must be attacked separately and studied in detail.This book is a good example of how this should be done. The conventional theory assumed a fixed number of commodities and fixed tastes and habits on the part of consumers. That these variables might change was a fact too obvious to be ignored; but having been recognised, it was quickly swept under the carpet or, at best, handled by residual-trend analysis. In the pages that follow, Dr Ironmonger examines, both theoretically and empirically, the importance of new commodities and their influence on the tastes and habits of consumers. He points out that for some time managers and technologists have been concerned not only with better ways of making commodities but also with the need to make better commodities. He distinguishes between new, established and outmoded commodities and shows how this classification can be carried out by the simple device of lagsequence graphs. A retabulation of time series of consumption drawn up on this basis, in place of the usual shopping-list categories, is highly illuminating and brings out the extent to which the change in the consumption pattern of British consumers over the inter-war years is attributable to the diffusion of new commodities.The explicit recognition of the importance of new commodities calls for a new look at the conventional theory of consumers' behaviour and, in particular, at the relationships connecting goods, wants and utility. Dr Ironmonger develops the theory from this point of view, dealing first with the individual consumer and then with groups of consumers. His analysis leads him to emphasise discreteness and discontinuities, which can best be handled by programming methods. As he says in his conclusions: 'some consumers may be infinitesimal calculators; rather more, we expect, are linear programmers'.Studies like the present one are both useful and necessary because they force us to take seriously, and enable us to correct, the over simplifications of earlier work. They also help us to get our priorities right in working towards a new synthesis. For in largely non-experimental subjects like economics it is usually impossible to test very elaborate hypotheses and it is therefore essential that our models should reflect the important aspects of reality to the exclusion of the unimportant ones.