The Dependence Effect, Consumption and Happiness: Galbraith Revisited

In his analysis of the affluent society, Galbraith argued that advertising and the sales promotion activities of firms create wants for people, which makes them consume more without making them better off, because their wants were artificially created. Thus, in the affluent society, ever-increasing levels of production (and consumption) do not increase welfare. This paper considers three criticisms of Galbraith's analysis: first, firms cannot 'create' wants for consumers without their consent, because consumers are not mere pawns in their hands; second, even if people's wants are created, they may be better off by consuming more; and third, that expansion of consumption can make people better off by expanding aggregate demand. It draws on the recent literature on consumption, income and happiness, and develops a simple model of growth and distribution, to argue that Galbraith's analysis holds up against these criticisms.