Household Purchasing Productivity: Concept and Consequences

Abstract

To provide a logically coherent explanation for the high correlations found between a nation’s economic affluence and overall subjective wellbeing, this research takes a micro-macro systems approach. We extend the standard micro theoretical model of the household, by separating purchasing from home production. This separation allows analysis of the opportunity costs in trading-off time and money (as in make or buy decisions) for various household processes. By expanding the household model, a formula is derived to empirically test the relationship between aggregate household income and aggregate household purchasing productivity.

The data, although rudimentary, support the hypothesis that growing economic affluence results in greater purchasing productivity. That is, aggregate household demand for marketing output increases more than proportionally to the purchasing time inputs to acquire it; and this increase in household purchasing productivity affords the option of trading off money for time (less make, more buy). Increasing purchasing productivity provides greater opportunities for household satisfaction, ceteris paribus, by freeing up time in household production; thereby providing more time and/or greater quality sensory data input into the consumption process to create satisfaction. Conversely, falling economic affluence has the reverse effect. It results in declining purchasing productivity and the necessity of trading off time for money (more make, less buy). Consequently, reduced opportunity for household satisfaction because of less time and/or lesser quality sensory characteristics input into the consuming process. Thus household purchasing productivity, which explicates the trade-off between make (or time) in home production versus buy (or money) in household purchasing, we argue, provides the linkage to explain a nation’s standard of living and potential happiness.