consumption, in economics, direct utilization of goods and services by consumers, not including the use of means of production, such as machinery and factories (see capital). Consumption can be divided into public and private sectors. Consumption is also viewed as a basically subjective phenomenon, with individual utility, or satisfaction, assuming primary importance. The foremost economist associated with the subjective view was Jeremy Bentham (1748–1832), whose English followers sought to measure quantitatively the utility provided by consumption. The process of consumption is central to any system of economics; Adam Smith made it the sole end of production. Production, the wholesale and retail trades, and consumption are closely linked, and the exchange of goods and services for money along the various stages from the producer to the ultimate consumer is the foundation of modern capitalist economy. In the 1930s, John Maynard Keynes introduced the influential theory of consumption function, which described the relationship between consumer income and consumption. Advertising and marketing are today the chief means by which manufacturers and retailers seek to increase consumption, leading many to contend that modern consumption is often governed by false needs. Such economists as Thorstein Veblen have tried to explain how advertising and marketing can affect consumer choices, where a number of different products are essentially the same. Contemporary economics has increasingly concerned itself with studying total consumption in an effort to implement effective government controls of the business cycle. Experience has shown that through taxation the modern government is often able to regulate the amount of its citizenry's disposable income, thus ultimately affecting the nation's total consumption.
See D. E. Nye and C. Pederson, Consumption and American Culture (1991).
The Columbia Electronic Encyclopedia, 6th ed. Copyright © 2012, Columbia University Press. All rights reserved.
More on consumption from Fact Monster:
See more Encyclopedia articles on: Economics: Terms and Concepts