How to Rationalize Consumption During Economic Depression: Practical Tips and Strategies

Introduction:

Consumption is a fundamental aspect of our daily lives, but during times of economic depression, it becomes more critical than ever to rationalize our consumption habits. In this post, we will discuss practical tips and strategies for distinguishing between needs and wants, adopting a long-term perspective, and considering the social and environmental consequences of our consumption choices.

Distinguish Between Needs and Wants:

During an economic depression, it's essential to distinguish between needs and wants. Focusing on our needs and reducing our wants can help us save money, reduce waste, and avoid debt. By prioritizing essential goods and services such as food, water, shelter, clothing, health care, and education, we can ensure our survival and well-being. This approach aligns with the current income hypothesis, which suggests that consumption is a function of current disposable personal income.

Adopt a Long-Term Perspective:

The permanent income hypothesis teaches us that consumption should reflect the average income that households expect to earn over their lifetime rather than temporary changes in income caused by economic depressions or other factors. Therefore, adopting a long-term perspective is crucial to rationalizing consumption. Planning ahead and saving for the future can help us smooth our consumption over time and avoid excessive spending or borrowing.

Consider the Social and Environmental Consequences:

Consumption is not just a personal matter; it's also a collective one. Our consumption patterns have social and environmental impacts that affect the well-being of other people and the planet. During an economic depression, it's particularly vital to consider the social and environmental consequences of our consumption choices. By consuming less and better, we can support social justice and environmental sustainability.

Conclusion:

Rationalizing consumption during an economic depression requires a multi-faceted approach. Distinguishing between needs and wants, adopting a long-term perspective, and considering the social and environmental consequences of our consumption habits are practical strategies for improving our financial situation, enhancing our quality of life, and contributing to a better world.

Sources:

Principles of Economics. (n.d.). Determining the Level of Consumption. Retrieved from https://open.lib.umn.edu/principleseconomics/chapter/28-1-determining-the-level-of-consumption/

BBC Future. (2021). How the world embraced consumerism. Retrieved from https://www.bbc.com/future/article/20210120-how-the-world-became-consumerist